Thursday, December 20, 2007

Bush Says U.S. Economy Sound, People `Concerned' About Housing

``I'm concerned about the fact that Americans see their costs going up,'' Bush said today at a White House news conference. ``I know Americans are concerned about whether or not their neighbor may stay in their house.''

Although the nation's economic ``fundamentals are strong,'' the president said, his administration will ``consider all options'' to prevent a recession. He didn't give any specifics.
The economy has been battered by a slump in housing and a credit collapse caused by losses in the market for subprime mortgages. New York Senator Charles Schumer is among the Democrats in Congress and on the presidential campaign trail who have ripped Bush for what Schumer yesterday called the administration's ``serious mishandling'' of the economy and its response to mounting foreclosures.

Bush pointed to actions already taken to confront the housing slump. He and Treasury Secretary Henry Paulson earlier this month announced a plan negotiated with lenders and regulators to help as many as 1.2 million people keep their homes by freezing rates on some subprime adjustable-rate mortgages. He also signed legislation today to protect homeowners from being taxed on canceled debt when they refinance to head off a foreclosure.

``I made it clear we're not going to bail out lenders, and we're not going to help speculators, but we will help creditworthy people stay in their homes,'' he said.
Bush said he isn't troubled by Wall Street institutions turning to Asian and Middle Eastern governments for $25 billion to prop up balance sheets as they book losses on investments in securities that contain subprime home loans.

Morgan Stanley yesterday wrote down its subprime-infected mortgage holdings by $9.4 billion and received a $5 billion cash infusion from state-controlled China Investment Corp. Citigroup Inc., Bear Stearns Cos. and Zurich-based UBS AG also have received cash infusions from sovereign funds.

``I'm fine with capital coming in from overseas to help bolster financial institutions,'' Bush said today. ``What would be a problem is to say we're not going to accept foreign capital, or we're not going to open markets, or we've become protectionists.''
Subprime Losses

The losses from subprime mortgages are going to ``have to work through the system'' and Wall Street firms must be transparent about investments that have gone bad, he said. ``If there's some write-downs to be done, they need to do it now.''

The U.S. housing recession has slowed U.S. economic growth. The economy probably will slow this quarter to a 1 percent annual rate from a 4.9 percent pace in July to September, according to surveys of economists by Bloomberg News. Fed officials are predicting the expansion will slow to as little as 1.8 percent by the end of next year.

During the news conference, Bush congratulated Congress for finishing work on a ``good energy bill'' and making an adjustment to the tax code to prevent the alternative minimum tax from increasing levies on some 23 million households.

He expressed disappointment that lawmakers passed a measure to fund government operations in a catch-all spending bill. The legislation passed yesterday included funding for 9,800 pet projects of lawmakers, he said.

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Tuesday, December 18, 2007

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Wednesday, November 28, 2007

Financial Firms Hunt for cash

As Citigroup Inc. was dealing with billions of dollars in subprime bad credit mortgage-related losses and the departure of Chief Executive Charles Prince, it got an unexpected call from a prominent investment banker suggesting a merger with Bank of America Corp.
Citigroup's board dismissed the informal approach "totally out of hand," and no discussions have taken place, says a person familiar with the matter. "When you're looking for a CEO, that's no time for a transaction," this person says.
Bank of America says it never authorized a formal overture to Citigroup.

Citigroup's board, meanwhile, gave a green light to a smaller transaction -- a $7.5 billion capital infusion from an investment arm of the Abu Dhabi government. In exchange, the Abu Dhabi Investment Authority will receive a 4.9% stake in the form of convertible stock.
More broadly, the Abu Dhabi deal shows that after years of doling out money to corporate clients and consumers, financial companies now need some fresh cash of their own.
Faced with massive losses linked to the subprime-mortgage crisis and accompanying credit crunch, several of the nation's financial institutions -- from Wall Street investment firms to bond insurers -- are assessing their need for new sources of capital. And they are likely to intensify their fledgling efforts in coming months amid signs that they could face billions of dollars in additional losses as the mortgage-market fallout persists.

"It's a bitter pill to swallow to admit that the problems in the market have reached the point that companies that traditionally could fund themselves now need external sources of capital," says David Honold, who invests in financial stocks at Turner Investment Partners in Berwyn, Pa.

Of course, one way to tap external capital is to merge operations. The merger boom that fizzled out this summer was driven by cheap and plentiful financing in the debt markets and a booming stock market. With credit increasingly tight and the stock market looking shakier, Wall Street may now see a round of opportunistic deal making.

Bank of America, based in Charlotte, N.C., has long been one of the most opportunistic acquirers in the banking industry. In the past couple of years, it has scooped up retail bank FleetBoston Financial Corp., credit-card issuer MBNA Corp., wealth-management firm U.S. Trust Co. and, most recently, LaSalle Bank.

This wasn't the first time Citigroup received an overture involving Bank of America; it got a feeler from the bank several months ago, according to a person familiar with the matter. The latest one, though, was quickly disavowed. "Bank of America did not authorize any investment banker to approach any company over the last six weeks," a Bank of America spokesman said.

Friday, November 16, 2007

What is a Bad Credit Mortgage Loan?

Five Stars Mortgage has posted an article explaining the mysteries of the bad credit mortgage loan.

Below is an exceprt from the article:

"Bad credit mortgage is no different from an ordinary mortgage except for the fact that it's given to people having a bad credit history. A bad credit mortgage serves as a boon for people having a bad credit history that could have happened due to non payment of debts in time, bankruptcy, black mark from any credit agency, court cases, or even in accurate information or credit fraud. Bad credit mortgage is also referred to as adverse credit mortgage, sub prime mortgage, non standard mortgage, poor credit mortgage or credit impaired mortgage. These are the same as bad credit mortgage refinace, bad credit mortgage home loans, and foreclosure refinance situations. Lenders generally shy away from people having a bad credit. But the situation has changed rapidly and many home mortgage lenders and bad credit mortgage company have sprung up that offer bad credit home mortgages to people having a bad credit history, with almost the same interest rates (just a marginal difference) and terms as in a normal mortgage loan. "

To read the entire article on bad credit mortgage loans in Florida visit:

Friday, November 9, 2007

The nation's fourth-largest bank, which lost $1.3 billion in the third quarter tied to market turmoil, reported a $1.1 billion drop in the value of its asset-backed debt just in October alone.
Bankers' write-downs

The Charlotte, N.C.-based company said in a filing with the Securities and Exchange Commission that it's anticipating loan losses of $500 million to $600 million in the fourth quarter, citing anticipated loan growth and the impact of continuing credit deterioration in its loan portfolio.

"The expected credit deterioration will likely be focused in certain geographic areas that have recently experienced dramatic declines in housing values," the company's filing says.
At last check, shares of Wachovia dropped 1% on trading volume of more than 17 million shares.
Due to the October market deterioration, Wachovia's asset-backed collateralized debt obligations, or CDOs, experienced further declines in value in October 2007 by an amount it currently estimates to be approximately $1.1 billion pre-tax, the filing said.

In the third quarter, market losses totaling $1.3 billion pre-tax included $347 million of subprime-related valuation losses on CDOs.
As of Oct. 31, Wachovia said it had remaining exposure of $676 million to asset-backed CDOs, compared with $1.8 billion the previous month. Wachovia has exposure to subprime residential mortgage-backed securities of $2.1 billion, according to the filing.
Write-downs related to CDOs and subprime mortgage-backed securities totaled $1.11 a share during October, Wachovia said. Net write-downs for the third quarter were 35 cents a share.
The market for these assets "have remained extraordinarily volatile in the first week of November with additional rating agencies' downgrades ... and credit spread widening and illiquidity."

More write-downs coming out of Wall Street have heightened fears the fallout from the subprime turmoil is spreading deeper into credit markets. American International Group Inc. (AIG:
American International Group, Inc earlier this week joined the chorus of firms disclosing subprime-related losses.
"While it is unclear if these write-downs are enough, the remaining CDO exposure of $676 million is well below that of others," wrote analysts at Deutsche Bank in a research note on the Wachovia filing. They estimated that Morgan Stanley has $6 billion in CDO exposure, Merrill Lynch & Co. has $42 billion.

The analysts said the extra loan-loss provisions of between $500 million and $600 million are related to Wachovia's acquisition of mortgage company Golden West Financial. "As such, we believe the company is trying to get ahead of likely higher future mortgage losses in California," they wrote. Last year, Wachovia bought Golden West for $26 billion.

"Nevertheless, we consider this to be negative news," Deutsche Bank said. "Per the investment bank, management indicated that it would stay the course but we wonder if additional changes could be needed. Second, per Golden West, it now becomes even more obvious that Wachovia purchased the thrift at the wrong time of the cycle."

"Perhaps more important than the valuation write-downs is the need to build the loan loss reserves for credit quality deterioration," wrote Stifel Nicolaus & Co. analysts in a report Friday. "The need for additional valuation write-downs was becoming evident in recent weeks, so the Street knew it was coming. But the credit losses may not have been as expected."

The analysts lowered their fourth-quarter profit estimate for Wachovia to 55 cents a share from $1.10.

"Everyone keeps hoping that the worst is over, but we expect to see continued negative news as the fallout from the subprime lending spree spreads," said Walter O'Haire, senior analyst at financial research and consulting firm Celent.

"The hangover is not only painful, but there is no near end in sight," he said. "To complicate matters, there is still disagreement on how to best arrive at a 'market value' for various complex debt derivatives [and] securities, since almost no one wants to own the paper and there is little to no market for it today."

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Friday, November 2, 2007

Merrill hedge-fund arrangement in question

After hitting five-year lows a day earlier, financial stocks continued to slide on Friday as investor concerns focused on Merrill Lynch and Washington Mutual. In the past few days, concerns seemed to shift from the companies' poor judgment and weak risk management to the possibility that business practices may not pass regulators' tests.

Shares of Merrill Lynch & Co. fell more than 7% Friday, retreating in the face of a Wall Street Journal report that the company has engaged in deals with hedge funds to delay when it had to record losses on risky mortgage-backed securities.

Washington Mutual may have to set aside some $412 million to $2.1 billion in extra reserves if a lawsuit filed by New York state's attorney general against the mortgage lender succeeds, a Keefe Bruyette & Woods analyst estimated on Friday.

U.S. stocks on Friday shifted in and out of positive territory as investors weighted a surprisingly strong October jobs report and an unexpected rise in factory orders against ongoing credit-related upheaval in financial stocks.

Deutsche's Mayo estimates $10 bln in fourth-quarter write-downs
Deutsche Bank analyst Mike Mayo estimates there will be more than $10 billion in new write-downs during the fourth quarter, including $4 billion each at Citigroup bln subprime hit, Goldman estimates

UBS may take a subprime-related hit of $5.2 billion in the fourth quarter, according to Richard Ramsden, an analyst at Goldman Sachs. He calculated the estimated write-down based on the performance of credit-default spreads since the end of September.

Senate Banking Committee Chairman Christopher Dodd says Merrill Lynch & Co.'s $161.5 million exit package for former Chairman and Chief Executive Officer Stan O'Neal may revive efforts in Congress to give shareholders more power to curb CEO salaries.

Meredith Whitney, whose downgrade of Citigroup Inc. shares helped wipe out $369 billion in U.S. stock market value, said she was the only analyst on Wall Street with the guts to say the bank may cut its dividend.

Commercial Mortgage Lender Five Stars Mortgage continues offering cutting edge products to the National Mortgage Markets. Hard Money Commercial Loans are also being offered by the Commercial Loan Provider.

Shares in Barclays fell as much as 8% to hit two-and-a-half year lows on Friday amid market talk of funding worries and speculation it is telling analysts to trim profit forecasts.

Men like Jim Chanos and Bill Ackman will be watching the collapsing share prices of companies such as Ambac and MBIA with a sense of triumph -- and the warm glow that comes from turning a fine profit. Both hedge-fund managers have long held short positions on the equities of one or other of these bond insurers -- known as monolines -- and have not been shy about condemning their business models or risk positions.

Tuesday, October 30, 2007

S&P/Case-Shiller Home Prices Fell 4.4% in August

Home prices in 20 U.S. metropolitan areas slumped in August by the most in at least six years, a private survey showed today.

Values dropped 4.4 percent in the 12 months that ended August, an eighth consecutive decline, according to the S&P/Case-Shiller home-price index, which has data back to 2001.

The figures reinforce the view among Federal Reserve officials and Treasury Secretary Henry Paulson that the housing slump has further to go. Near-record inventory levels suggest sellers will continue to lower prices, posing a threat to consumer spending because homeowners will have less equity to borrow against.

This is really the No. 1 risk: a sustained, sharp decrease in home prices really squeezing consumers,'' said Meny Grauman, an economist at Scotia Capital Inc. in Toronto.

Economists forecast the gauge would decrease 4.2 percent, according to the median of 11 estimates in a Bloomberg News survey.

The group's 10-city composite index, which has a longer history, dropped 5 percent in the 12 months ended in August, the most since June 1991.

In a separate report, an index of consumer confidence declined to 95.6, the lowest since October 2005, from a revised 99.5 the prior month, the New York-based Conference Board said. The index was forecast to drop to 99, from an originally reported reading of 99.8 for September, according to the median estimate in a Bloomberg News survey of 70 economists.

Compared with July, home prices in the 20-city index fell 0.7 percent after a 0.4 percent decline the month before. The figures aren't seasonally adjusted, so economists prefer to focus on the year-over-year change.

``The fall in home prices is showing no real signs of a slowdown or turnaround,'' said Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, in a statement. ``There is really no positive news in today's report.''

Shiller and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.

The index is a composite of transactions in 20 metropolitan regions. Fifteen cities showed a year-over-year decline in prices, led by a 10 percent drop in Tampa, Florida, and a 9 percent decline in Detroit. The area showing the biggest gain was Seattle with a 5.7 percent increase.
Fed Forecast

Most economists expect housing to extend its slump and continue to be a drag on economic growth as loan foreclosures rise and tougher lending standards make borrowing more difficult.
Traders and economists expect the Federal Reserve to cut its benchmark overnight lending rate between banks tomorrow by at least a quarter point. Policy makers on Sept. 18 reduced the interest rate for the first time in four years, to 4.75 percent from 5.25 percent.

Paulson said today it's too soon to call an end to the housing slump.
``We haven't hit the bottom yet in housing,'' Paulson said at a conference in New Delhi. Still, he added ``there is enough strength in the economy that we can grow through this.''
Homeownership in the U.S. has dropped the last four quarters, the longest string of declines since at least 1981, the Census Bureau said on Oct. 26. Also last quarter, a record 17.9 million U.S. homes were vacant.

Sales of existing homes dropped last month to the lowest level since record-keeping began in 1999. The decline to a sales pace of 5.04 million annual rate brought the inventory of homes for sale to a record high of 10.5 months' supply. The median price of resales fell 4.2 percent from a year earlier.

The price measure from the Realtors group can be influenced by changes in the types of homes sold. Because the S&P/Case- Shiller index and another gauge by the Office of Federal Housing Enterprise Oversight track the same home over time, economists say these more accurately reflect price trends.

Recent price cuts may not be enough to bring in some buyers. Pulte Homes Inc., the third-largest U.S. homebuilder said Oct. 25 that the reductions it's enacted didn't boost sales last quarter.

``Time has proven that no one can be sure when this particular downturn will end or begin to show signs of stabilization,'' Chief Executive Officer Richard Dugas said on a conference call. ``Since we are not sure how long this environment will stay this bad, Pulte plans to be prepared for the worst.''

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Wednesday, October 10, 2007

Banks can help in times of distress

Banks must step up and provide loans during times of financial market distress and also help homeowners who find themselves behind in their payments of unfavorable mortgages, said Eric Rosengren, the new president of the Boston Federal Reserve Bank.

There might even be some profit opportunities for banks if they can move into the market for subprime mortgages, Rosengren said. Many of the independent brokers who created the market for subprime mortgages have gone out of business in recent months.

"While the subprime market that was the epicenter of the problem is likely to continue to have difficulties, I am hopeful that financial institutions will play an important role in providing financing for many of the borrowers facing higher rates as their mortgages reset," Rosengren said in his first speech after assuming his new post in July.

"The most critical issue is that financing that supports responsible subprime lending continues," Rosengren said.

Subprime is the industry shorthand for mortgages that are not the highest quality. Many lower middle class families were able to buy homes with such loans, but the sector also includes mortgages for higher-priced homes.

Instead, the central issue was a lack of liquidity, as relatively low-risk financial assets traded between large financial institutions experienced the most difficulty.

Bank balance sheets expanded in August and September as securitization of subprime mortgages and other asset-backed commercial paper declined.

Rosengren said that "conservatively underwritten securitizations and asset-backed commercial paper will find acceptance by investors" but said this will take some time.

In his remarks, Rosengren did not dwell on the economic impact of the recent financial turmoil.
He said that the effect of the problems in housing on consumption has been muted to date.
But he said if housing prices fall further or if the price declines spread across the country, this "would increase the risk of a more adverse impact on consumption."

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Tuesday, October 9, 2007

trimmed staff at its alt-A/conventional mortgage affiliate

Earlier this year, when Merrill Lynch forked over $1.3 billion to buy subprime lender First Franklin Financial Corp., and some of its affiliates, a handful of executives were dancing in the hallways at National City in Cleveland. NatCity owned FFFC and, indeed, it would seem that they sold the subprime shop at the top of the market (and before the nonprime liquidity crisis reared its ugly head). But let's forget about FFFC for a moment. Does anyone see the irony of Merrill Lynch — known for selling stocks to America's wealthy — trying to make a buck by lending to credit impaired Americans? Let's not forget that Merrill was a major (and I do mean major) warehouse financier of non-banks plying their trade in subprime, including Ownit Mortgage, Mortgage Lenders Network and ResMAE, among others. What do all these lenders have in common? They all filed for bankruptcy protection. Some in the industry even speculated that Merrill was engaged in a plan to reduce the number of subprime lenders so that FFFC would have less competition, a thought that only a conspiracy theorist would hatch. One subprime executive who sold loans to Merrill told me that Merrill "was one of the most aggressive buyers of loans. They paid more than anyone and they did less due diligence." He blamed Merrill's woes on a top trader there, whose identity I'll get to in a future column as I continue to research the roots of this crisis. On Friday Merrill Lynch estimated that it will take $4.5 billion in credit-crunch-related writedowns (net of hedges) on subprime mortgages, collateralized debt obligations and leveraged finance commitments.

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Sunday, September 30, 2007

Fed cut sends long-term rates up

many would-be home buyers are about to be stripped of a misperception, namely the idea that when the Federal Reserve Board is cutting interest rates mortgage rates will fall as a result.

In a radio interview with Chuck Jaffe, MarketWatch senior columnist, McBride noted that the Fed is combating the economy, but some observers worry that its bigger-than-expected move might be opening the door to inflation, a concern which has pushed mortgage rates up slightly since the Fed's most recent move.

According to, the average 30-year fixed rate mortgage in the country currently carries a rate of 6.4%, which represents a reversal of course. The average mortgage rate had dropped below that level, to roughly 6.25%, in the two weeks leading up to the Fed announcement Sept. 18 that it was cutting the target for the federal funds rate to 4.75% from 5.25%.

McBride noted that the Fed's rate cut is bad news for long-term savers, as rates on certificates of deposit maturing in two or more years have fallen, while short-term rates have remained steady. This erases any risk premium that a saver gets for tying up money for a longer stretch of time.

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Monday, September 17, 2007

Falling home prices could dent economy

Just as rising home prices helped fuel the economic expansion of the past six years by making people wealthier, falling home prices could put a big dent in economic growth in the next few years by making them poorer.

At this point, few economists expect the economy to sink into a recession, but almost all of them agree that consumer spending would slow, perhaps significantly, if home prices were to fall.

With the number of excess homes rising amid falling demand, the negatives in the housing market will "continue putting downward pressure on prices," said Seamus Symth, an economist for Goldman Sachs, who says home prices were plunging at a 9% annual rate in the most recent data. Goldman expects home prices to fall 7% this year and another 7% next year.

The path of home prices could be the key to whether the economy grows or stalls.
"A big issue is whether developments in the relatively small housing sector will spread to the large consumption sector, perhaps through declines in house prices," San Francisco Federal Reserve Bank President Janet Yellen said in a recent speech. "Should the decline in house prices occur in the context of rising unemployment, the risks could be significant."

Economists are forecasting that home prices will decline more than 5% this year and nearly 4% next year, according to the latest survey by Blue Chip Economic Indicators. Those same economists expect consumer spending to slow from 3.1% last year to 2.8% this year and 2.3% next year.

While a cumulative 8% drop in home prices (after nearly doubling in the previous six years) doesn't sound so ominous, such a decline would be the largest since the Great Depression.

Because most owners are reluctant to sell at a loss unless they are forced to, it's extremely unusual to see nominal home prices fall. In economists' jargon, home prices are "sticky" on the downside, but not on the upside.

By comparison, prices in the stock market adjust quickly to new perceptions about values, as investors take their losses and move on. During market corrections, the volume of shares traded doesn't fall, because the market quickly finds a new equilibrium between supply and demand.
The housing market is completely different. Sellers don't quickly adjust their prices to a new market reality. And because prices don't fall to bring demand into balance with supply, the volume of houses sold plunges during a correction. Home sales are now down 23% from the peak more than two years ago. The housing market can take years to find an equilibrium. In most housing corrections, sales remain very weak until excess supply is worked off. Prices can be flat for years.

So why are prices falling now? There's every reason to believe that supply and demand are getting even further out of balance. The number of vacant homes is at a record level, and more new homes are coming on the market every day. Foreclosures are rising, further increasing supply. More adjustable-rate mortgages will reset to a higher monthly payment in coming months, pressuring more homeowners to sell or default.

At the same time, the rationing of credit is reducing demand. The subprime and Alt-A mortgage markets, which represented about 40% of mortgages last year, have almost completely dried up. Lenders are increasing their standards for approving a loan, and interest rates for jumbo loans have risen substantially.

The difficulties in the mortgage market will not only depress home sales, it will also reduce consumer spending. In recent years, consumers have taken advantage of the mortgage market to withdraw and spend some of the equity they've built up in their homes,
"We've given people the ability to spend more, and it's going away now," said Paul Kasriel, chief economist for Northern Trust.

Economists can't agree on how much spending has been boosted by mortgage-equity extraction, also known as MEW.

Some theorize that each additional dollar of wealth (from appreciation in assets such as housing or stocks) boosts spending by about 3 cents. By that account, the $8.1 trillion gain in real estate values since 2001 added about $243 billion to consumer spending over those six years, an insignificant amount compared with the $46 trillion they've spent.

But other economists say extra housing wealth is more likely to be spent than extra stock market wealth. Former Fed chairman Alan Greenspan and Fed economist James Kennedy concluded in a study published in 2005 that consumers spent about half of what they took out of their homes, and invested the other half in home improvements.

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Friday, September 7, 2007

The number of mortgage loans entering the foreclosure process in the second quarter set another record, according to the latest data from the Mortgage

According to the group's quarterly delinquency survey, a seasonally adjusted 0.65% of loans on one- to four-unit residential properties entered the foreclosure process during the period, the highest level in the survey's 55-year history. In the first quarter, when the previous record was set, 0.58% of loans entered the process; a year ago, 0.43% entered the process.

The delinquency survey covers more than 44 million mortgages, meaning more than 286,000 loans entered the foreclosure process during the quarter. Coverage of home buying and selling, housing prices, mortgage information and home improvement

Driving the numbers were the states of California, Florida, Nevada and Arizona, said Doug Duncan, MBA's chief economist and senior vice president of research and business development, in a news release.

"Were it not for the increases in foreclosure starts in those four states, we would have seen a nationwide drop in the rate of foreclosure filings. Thirty-four states had decreases in their rates of new foreclosure and the increases were very modest in the states with increases, other than those four," Duncan said.

Duncan said there was a "clear divergence" in performance between fixed-rate and adjustable-rate mortgages because of the impact that rate resets have.

"While the seriously delinquent rate for prime fixed loans was essentially unchanged from the first quarter of the year to the second, and the rate actually fell for subprime fixed- rate loans, that rate increased 36 basis points for prime ARM loans and 227 basis points for subprime loans," he said.

Less clear is whether rate increases in subprime ARMs are causing major problems for those four key states, or whether local market conditions that are causing prices to drop are the main culprit because the lower prices are making it more difficult for people in unaffordable loans to refinance, said Jay Brinkmann, the MBA's vice president of research and economics, in a telephone interview.

California has 17% of the subprime ARMs in the country and more than 19% of the foreclosure starts on subprime ARMs. California, Florida, Nevada and Arizona have more than one-third of the country's subprime ARMs and more than one-third of the foreclosure starts on subprime ARMs.

Home prices have dropped in all four states, and 52 of the 59 metropolitan areas in the four states saw home price declines during the second quarter, according to the Office of Federal Housing Enterprise Oversight, the MBA said. The inventory of new homes for sale in the Western region hit an all-time high at the end of the second quarter, and Florida is dealing with a glut of condo supply, Duncan said.

These are also markets that have experienced a high share of investor loans, Duncan said. The share of non-owner-occupied loans that are 90 days or more past due or in foreclosure, as of June 30, was 32% in Nevada, 25% in Florida, 26% in Arizona and 21% in California. Comparatively, 13% of these loans were in default in the rest of the country.

"Whatever happens in those states is going to drive the national numbers but they don't represent national performance," Brinkmann said.

More statistics
According to the survey, 1.40% of all outstanding loans were somewhere in the foreclosure process during the second quarter, up from 1.28% in the first quarter and 0.99% a year ago.
Greatly factoring into those figures are markets such as Ohio, where mortgages that are 90 days or more past due or in foreclosure was still more than twice the national average, Duncan said. In addition, 1% of mortgages in Michigan entered the foreclosure process in the second quarter, and nearby states including Indiana, Illinois, Kentucky, Tennessee and Pennsylvania are also seeing foreclosure problems, he added.

"While Michigan's problems continue to escalate, however, Ohio's have shown signs of leveling off, albeit at a high level," Duncan said in the release.

The delinquency rate for mortgages on one- to four-unit proprieties was 5.12% in the second quarter, up from 4.84% in the first quarter and 4.39% a year ago.

Looking ahead
The freeze up and turmoil in the mortgage markets that has occurred since June 30 will have an effect on these numbers in the coming quarters, Duncan said during a conference call with reporters.

Because credit availability has been constrained, refinance options are limited for borrowers, curtailing opportunities for homeowners on the margin of being in trouble, he said.
Due in part to the turmoil -- and possibly the affect of resets in 2/28 ARMs that were originated in 2005 and 2006 -- the MBA suspects that the peak in foreclosures and delinquencies hasn't yet been reached and won't until the next two to four quarters, Duncan said.

A research note by Lehman Brothers Economics said that the MBA results are consistent with the view that "the housing recession looks far from over," adding that tighter lending standards and the shrinking availability of credit should cause the performance of mortgage loans to get worse.

"As subprime ARMs continue to reset to higher rates, many borrowers will be forced to default and in some cases ultimately foreclose," the note read. "Higher foreclosures will add to already bloated inventory of homes, extending the housing recession."

Another note from Ian Shepherdson, chief U.S. economist for High Frequency Economics, pointed out the increase in the number of subprime loans compared with 2002, explaining that the number of subprime delinquencies is magnified as a result.

According to the MBA report, the delinquency rate for subprime loans was 14.82% in the second quarter, up from 13.77% in the first quarter. But while in the second quarter of 2002 there were 1.19 million subprime loans outstanding, today there are about 5.9 million, Shepherdson said.

"That's why the problem now is so much worse despite similar headline delinquency rates. Also, note that the rise in delinquencies this time is mostly due to resetting ARMs; the unemployment rate has not moved up. In '02, job losses did all the damage."

"So what happens now if unemployment goes up as resets increase too? Well, you ain't seen nothing yet," he wrote.

The MBA expects the Federal Reserve to cut rates a quarter percentage point in the next two meetings, a response to projections of weaker economic growth and higher unemployment, Duncan said.

He also commented that the rise in delinquencies and foreclosures has been the tradeoff to the steep rise in homeownership, which has come about after a major policy push to create more homeowners. He also pointed out that 35% of people who own a home don't have a mortgage.

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Tuesday, August 28, 2007

Has Bank of America's CEO saved the credit markets?

Sentiment is growing that Bank of America Corp.'s Kenneth Lewis may have won a place in the pantheon of great Wall Street titans by using his financial clout to help the country avoid economic ruin.

In some circles, Bank of America's is being seen as critical to the end of the Panic of 2007.

On Monday, The Wall Street Journal crowed that "the deal at once helped stabilize the credit markets and gave Bank of America a foothold in the nation's biggest mortgage lender." The move also was a tonic for a company that was driving "depositors into branches to withdraw funds and [sending its] stock tumbling," Merrill Lynch wrote in a negative credit report that mentioned the possibility of bankruptcy

"The infusion also may help to reassure investors that the mortgage market is safe after rising default rates sparked a global credit crunch," Bloomberg said. In Europe, Agence France-Presse observed that Lewis "boosted confidence about an easing of the credit squeeze," and that this was "a sign of confidence that the storm in the mortgage sector may be ending."

The B. of A. move comes exactly a century after J.P. Morgan -- back then, the man and the bank were the same -- helped stem the Panic of 1907. That year, depositors made a run on two U.S. banks. Morgan responded by convincing U.S. Treasury Secretary George Cotelyou to inject $25 million into the banking system. Sound familiar?

Morgan also created a $3 million pool to save Trust Co. of America. Responding to pleas from the New York Stock Exchange, Morgan, leading a consortium of bankers, pledged another $25 million to back the exchange. He also bailed out New York City by backing a $30 million bond issue.

In today's terms, that would be about $600 million for the banking system, $71 million to Trust Co. and a $631 million bond issue. Morgan didn't put up all the funds, but he organized the relief.
His reward? Morgan helped the economy, and in turn his own assets. Brokers on the floor of the NYSE cheered his action to help the exchange so loudly that he could hear the roar from his office across the street at 14 Wall St. A thankful Washington allowed him to buy a railroad worth about $16.7 billion today for $1.1 billion.

Morgan isn't alone in coming to the rescue during a financial crisis. Other financial titans have come forward to offer help, albeit smaller in scale. Recently, Warren Buffett rescued Salomon Brothers in 1991, and a consortium of banks rallied by the New York Federal Reserve bailed out Long-Term Capital Management by putting up $3.6 billion in 1998.

U.S. banks also stepped in to buy flailing savings and loan thrifts in the late 1980s and '90s. They usually scooped up assets as discount prices.

'Bank of America was just looking for a bargain, and essentially got one.'
— Charles Geisst, professor and author

This idea of bailing out by bargain-shopping is really what's at work here with Lewis. "Bank of America was just looking for a bargain, and essentially got one," said Charles Geisst, a history professor at Manhattan College and author of several finance books, including "Wall Street: A History, From Its Beginnings to the Fall of Enron."

Geisst believes that the Countrywide acquisition didn't even really stabilize the mortgage markets, as some have suggested. The market for mortgage-backed securities is still impaired, he commented.

This leaves Lewis as more of a shrewd opportunist than patriotic investor. He and B. of A., after all, have been pining for a piece of Countrywide for more than five years.

Not only did the executive get the stock at a deep discount of nearly 50%, but also the shares pay a 7.25% dividend. What's more, the investment immediately returned a paper profit of more than $400 million after the deal was announced and Countrywide's stock soared.

For those longing for a Wall Street baron to save the markets like the great J.P. Morgan, there may be opportunity yet.

"We will get some rescues," Geisst said, pointing to the decision by B. of A., Citigroup Inc. to borrow $500 million each from the Fed's discount window.

"Those four going to the discount window is like someone from the Upper East Side going to Wal-Mart," Geisst added. "They were probably fronting in the marketplace for an institution that was really in trouble."

Maybe there's a modern-day Morgan out there. We can all pitch in and buy him a railroad.

Five Stars Mortgage provided today an outline for a new 100% mortgage loan with no downpayment for it's clients.

Sunday, August 26, 2007

100% Financing with bad credit in 2007

A guide to 100% Financing with bad credit in 2007 (Background)

At the end of 2006 and the start of 2007 the mortgage and real estate industry as a whole experienced the biggest downward spiral in decades. The real estate market finally peaked after several years of record breaking rising values. As always happens in the real estate market, the values rose to a point beyond that which the average home buyer could tolerate. Investors were not able to sell at the same profits, and buyers felt costs reached a limit that was unattainable and new home buying began to cool.

In the financial arena we had several years of record mortgage origination volumes of which sub-prime mortgages, also known as bad credit mortgages, made a huge percentage of. Lenders were loosening guidelines and creating ever more aggressive programs to try to take advantage of the booming market. This led to many bad credit consumers accepting a loan program that was not in their best interest. The most popular and notorious loan was the 2 year ARM. With a teaser rate that allowed affordable monthly payments.. when these loans adjusted in 2007 we saw many people in loans that they could no longer afford. This cause a massive amount of foreclosure and loan defaults to take place. Lenders were taking bottom line hits in the millions that forced them to declare bankruptcy and shut their doors. This combined with the scrutiny lenders received from Government agency caused some of the biggest players in the industry to leave the loan origination arena. This had a severely negative trickling affect as the remaining lenders faced some very tough decisions. They saw that they could no longer originate loans as they had In the past.

The number of sub-prime lenders that closed doors was astounding. For the remaining lenders in the industry and few the new ones that would pop up in 2007, tighter underwriting standards prevailed. No more could the crazy loose guidelines from years past be allowed. Lenders had to really take a hard look at if a buyer was going to be able to repay their loan, even after an adjustment on an ARM loan took place. They needed to verify more information about the borrower’s history and had look deeper into their spending habits to qualify them for a loan. This led to far fewer loans being originated and fewer sub-prime buyers being able to purchase their first home. Also due to the stricter guidelines those borrowers that had originally been qualified for a loan and placed into a short term (band-aid) ARM loan were not able to qualify for a refinance when the adjustments came due. This forced many people into foreclosure situations.

What we had by the end of the first quarter of 2007 was a perfect storm in the sub-prime lending business and real estate markets. With an oversupply of inventory in real estate coupled with the fact that lenders were not willing to originate loans to the bulk of the buyers.. situations became bleak quickly. Thousands upon thousands of jobs were lost. Realtors, Real estate brokers, Account Executives, Processors, Underwriters, Mortgage Brokers, and loan officers all lost jobs. With fewer lenders and Broker business left operating many of these people had to leave the industry for a new career.

The few that remained were left to pick up the pieces and forge a responsible path for the future. With Mortgage Brokers taking a media beating the life of the mortgage broker and loan originator in 2007 continues to be a difficult one.

In part two of this article we will examine living with the new aftermath in bad credit mortgages in 2007 and some things all potential buyers need to know in order to buy their first home or refinance into a better loan.

Orlando bad credit mortgage is still being offered by Five Stars Mortgage.

Thursday, August 23, 2007

Mortgage lender's shares jump in morning trading

In a move that could help the largest U.S. mortgage lender survive a crisis that's rocking the home-loan industry, Bank of America . The nonvoting securities pay an annual interest rate of 7.25%.

They can be converted into common stock at $18 a share. If that happens, Charlotte, N.C.-based Bank of America won't be able to trade the stock for 18 months after conversion, the two companies said in a statement.

Separately, Wachovia upgraded Countrywide to market perform from underperform, citing the Bank of America investment.

"We believe that Countrywide Financial still faces many near-term challenges. But the influx of cash and capital reduces the potential for a catastrophic liquidity event, in our view," Wachovia told clients early Thursday. "Recent actions also suggest that the Federal Reserve is willing to provide liquidity despite lingering inflation concerns."

Countrywide's shares have been hammered this month as a broadening crisis in the mortgage business cut off the company's access to its usual sources of borrowing in the market.
Countrywide had to tap an $11.5 billion loan facility from 40 banks last week and said it was planning to funnel most of its mortgage origination through its bank. But then Countrywide had to head off a run on its bank as some depositors withdrew their savings.

"We hope this investment will be a step toward a return to a more normal liquidity in the mortgage markets," said Kenneth Lewis, Bank of America's chief executive, in a statement. "In the current turmoil the stock market has been underestimating the value in Countrywide's operations and assets."

Bank of America's decision also highlights the importance of Countrywide's role in providing money for home purchases across the U.S., Lewis added, noting that Countrywide services the mortgages of one in seven American households.

"Bank of America's investment in Countrywide represents a vote of confidence and strengthens our balance sheet, enabling us to position Countrywide for future growth and success," said Angelo Mozilo, chief executive of Countrywide, in the statement.

Confidence still strong in the Tampa bad credit home loan specialist Five Stars Mortgage.

Wednesday, August 22, 2007

Lehman shuts BNC Mortgage unit, cuts 1,200 jobs

SAN FRANCISCO (MarketWatch) -- Lehman Brothers said Wednesday that it's shutting its subprime-mortgage unit BNC Mortgage LLC and firing 1,200 people, becoming the latest company to stop offering home loans to less-creditworthy borrowers. BNC was a top-20 subprime mortgage lender in 2006, originating more than $14 billion worth of home loans, according to industry publication Inside B&C Lending.

Lehman said it will keep offering mortgages through Aurora Loan Services LLC, another unit that focuses on so-called Alt-A home loans. Alt-A mortgages are offered to more-creditworthy borrowers, but they often require less documentation.
The closure of BNC will affect roughly 1,200 employees in 23 locations in the U.S., Lehman

The job cuts are the latest to hit the mortgage industry. Home loan companies have eliminated more than 25,000 positions in August alone.

Wednesday's move will cost Lehman more than $50 million, it said. Charges, including severance, real estate and technology costs, will total roughly $25 million after taxes, Lehman said. Another $27 million in costs would stem from the after-tax write-off of goodwill, the company added.

"Market conditions have necessitated a substantial reduction in ... resources and capacity in the subprime space," Lehman said in a statement.

Lehman shares rose 1.7% to close at $58.54 on Wednesday. The stock is down roughly 24% so far this year.

After mortgage lenders originate loans, they often package them up as mortgage-backed securities and sell them to institutional investors such as hedge funds, insurers, banks and pension funds.

During the recent housing boom, the securitization of subprime mortgages and other home loans was a lucrative business for investments banks. It became so attractive that some firms acquired subprime mortgage lenders so they could originate loans in-house to package up and sell. bought Saxon Capital for more than $700 million in December.

However, rising delinquencies on subprime mortgages have triggered a credit crunch in the mortgage business. More than 50 lenders have already gone bankrupt and investors in the secondary mortgage market have stopped buying securities backed by subprime loans.
That's undermined one of the main reasons why these investment banks acquired subprime mortgage originators.

Five Stars Mortgage continues to offer Miami Bad Credit Mortgages and 100% Financing in Florida. To learn more visit them on the web at

Sunday, August 19, 2007

Analysts say embattled mortgage lender can survive liquidity squeeze

In a research note, however, analyst Robert Lacoursiere cut his price target on the stock to $21 from $31. Shares of Countrywide, the largest U.S. mortgage lender, closed Thursday off 11% at $18.95 after it said it borrowed $11.5 billion from a group of 40 banks due to problems finding money in credit markets. To reduce its reliance on credit markets further, the company said that it would try to originate nearly all mortgages through its banking operation. See full story.
Lacoursiere said the upgrade doesn't reflect any shift in his bearish stance on the residential mortgage market. Instead, the stock price "fairly balances the probability of a conservative worst-case outcome of a liquidity induced distressed asset/breakup sale valued $7.25 against the prospect of a smaller and much less profitable company that we would value at $23.50 today."

Although Lacoursiere warned that "sizable risks remain," he said Countrywide's use of its credit line gives the company breathing room. "As a result we think the possibility of a liquidity induced distressed sale [is] unlikely," the analyst wrote.

Still, the company faces headwinds such as higher financing costs, slipping fundamentals and credit pressures, and Lacoursiere slashed his per-share profit estimates for this year and 2008. "Seeing the potential for a volatile saw-toothed performance as the market reassesses risk and confronts multiple quarters of poor results against deteriorating fundamentals, we do not see this as an opportunity to build a position," he said.

Credit agencies have already lowered their ratings on Countrywide's debt. The uncertainty surrounding the company's future highlights how far the pain that started in subprime mortgages has spread into other home loans that were seen as more secure.

Housing prices are down in many areas of the country, and more borrowers are defaulting as their mortgage rates rise. Several mortgage lenders have gone out of business or stopped originating new loans as sources of short-term financing have dried up. In response to the trouble in credit markets, the Federal Reserve on Friday said it has cut the discount rate to 5.75% from 6.25%.

The stock market rallied in response to the Fed's rare move as Countrywide's shares gained more than 11% at $21.18 in afternoon trading Friday.

Earlier this week, the stock plunged after Merrill Lynch analyst Kenneth Bruce downgraded the shares to sell from buy.

"We fear that the acceleration of margin calls and forced asset sales in the capital markets could lead to more problems for Countrywide to finance its mortgage operations," Bruce wrote in a note to clients Wednesday.

'[A]s as the best-positioned mortgage originator, Countrywide is highly undervalued right now.'
— Erin Swanson, Morningstar

"Should a liquidity event occur, for which the likelihood is increasing, Countrywide shares would probably witness further selling pressure," he said.

Morningstar analyst Erin Swanson in a Thursday note took a more cautiously optimistic tone. After reviewing Countrywide's financial position, "we believe the chances of bankruptcy are remote and the firm will be able to operate through the current liquidity squeeze," the analyst said.

Although the company is facing "unprecedented disruptions" in the mortgage market and won't be able to completely sidestep the near-term pressure, "any earnings hit will not destroy significant value," Swanson said.

"The waters ahead are choppy, and market fear is not subsiding," the analyst said. "However, we contend that as the best-positioned mortgage originator, Countrywide is highly undervalued right now."

"Although the situation is currently dire, we think Countrywide's strategy leaves the company viable over the long term," added analysts at Fix-Pitt Kelton in a report Friday. "Essentially Countrywide is walking away from market-based financing and moving to a more stable source of financing at the bank."

Meanwhile, some are backing the "too big to fail" argument.

"In our view, the odds favor having the government save Countrywide rather than letting it fail," said Stanford Group in a note Friday. "The disruption to the economy would simply be too great."

Jacksonville Bad Credit Mortgage Company Five Stars Mortgage says it is still able to offer 100% Financing in Florida for first time home buyers and clients with challenged credit.

Thursday, August 16, 2007

UPDATE 2-Moody's cuts $19 billion in subprime debt

NEW YORK, Aug 16 (Reuters) - Moody's Investors Service on Thursday cut its ratings on more than $19.4 billion of securities backed by subprime mortgage debt and Fitch Ratings said it may cut $12.1 billion.

Moody's said it cut 691 deals backed by closed-end second lien mortgages originated in 2006. The loans secured by a second priority mortgage lien on residential real estate, and are advanced in a specified amount at the closing of the loan.

"The actions reflect the extremely poor performance of closed-end second lien subprime mortgage loans securitized in 2006," Moody's said in a statement. "These loans are defaulting at a rate materially higher than original expectations."

"Aggressive underwriting combined with prolonged, slowing home price appreciation has caused significant loan performance deterioration and is the primary factor in the negative rating actions," Moody's added.

Fitch said on Thursday it may cut the ratings on $12.1 billion of securities, citing high delinquencies and a rapid deterioration in underlying credit support for the securities.
The rating action involves all classes within 58 RMBS subprime transactions backed by pools of closed-end second-liens. Thirty-five transactions were originated in 2005, 22 were originated in 2006, and one this year, it said.

While performance for individual transactions varies, Fitch said, the closed-end second-lien sector as a whole has significantly underperformed from original expectations.
"Ongoing pressure from the combination of a declining housing market, interest rate resets and weak loan underwriting standards, has led to high delinquencies, rising losses and a rapid deterioration of credit enhancement for these securities," the rating agency said.
Fitch said the latest transactions comprise the entirety of Fitch's rated portfolio of closed-end second-lien RMBS from that series of securities. For details, see [ID:nN16335404].

Miami bad credit mortgage broker Five Stars Mortgage continues to offer 100% Financing to borrowers with credit challenges.

Tuesday, August 14, 2007

Fixed-rate mortgages gain steam

Fixed-rate mortgages became more popular in the second half of 2006 as short-term rates increased, the Mortgage Bankers Association reported Tuesday.

According to the group's Mortgage Originations Survey, fixed-rate loans made up 46.2% of dollar volume for first mortgages in the second half of the year. In the first half, fixed-rate loans made up 43.3% of those loan dollars.

Coverage of home buying and selling, housing prices, mortgage information and home improvement.

In terms of the number of loans that originated during the time period, 60.5% were fixed-rate in the second half of the year, up from 54% in the first.

Total mortgage origination volume increased in the second half of the year, up 11% in dollar amount compared with the first half and up 19.4% based on loan count, according to the group. The MBA said that the increase in originations was due to a rise in home-purchase volume and an increase in refinance volume.

Interest-only loans accounted for 28.5% of originations in the second half of the year; they made up 25.6% in the first half, according to the survey.

And of all home purchases, 26.9% were made by first-time buyers, unchanged from the first half of the year. The average loan amount for these buyers was $197,044; the average loan amount for those who had bought before was $228,547.

Subprime mortgages Despite an overall shift to fixed rates, adjustable-rate mortgages made up a bigger percentage of all subprime originations in the second half of 2006, according to a separate MBA survey. ARMs comprised 75% of subprime originations in the second half of the year, compared with 67% in the first half, according to the Subprime Mortgage Originations Survey.

In addition, the group reported that the percentage of subprime loans being used by first-time home buyers was 15%, up from 12% in the first half of the year. Fifty-five percent of subprime originations were for refinances, unchanged from the first half of the year.

The average loan amount for a subprime loan in the second half of 2006 was $202,295, up from the first half of 2006, when the average loan amount was $200,167, the MBA said.
Regarding second mortgages, the average subprime loan amount was $35,506, up from $33,555 in the first half of 2006. The increase in the average loan amount was driven by a sharp increase in closed-end loans, the group reported.

According to MBA research, origination volume of all second mortgages -- both prime and subprime -- decreased 5.8%. Closed-end second mortgages, which usually have a fixed rate for a set term, increased 6.3% and home-equity lines of credit, many of which are tied to the prime rate, decreased 11.6%.

Tampsa, FLorida bad credit loans are still available from 100% mortgage company Five Stars Mortgage.

Monday, August 13, 2007

U.S. banks tightening mortgage standards, Fed says

WASHINGTON (MarketWatch) -- U.S. banks continued to tighten their standards for approving mortgage loans in the spring and early summer months, the Federal Reserve said Monday.

In particular, banks were imposing tougher standards before they'll approve subprime and nontraditional mortgages. But even the borrowers with the best credit were facing tougher standards at some banks.

Loose lending standards for mortgages over the past several years had inflated the housing market, but now the tightening of those standards has led to the bankruptcy of several lenders and the insolvency of some hedge funds that had invested heavily in U.S. mortgages. Worries about further repercussions have hit global financial markets in recent weeks.
In the three months ending in July, 56% of the 16 banks that make subprime loans toughened their standards.

— The Federal Reserve
Analysts are worried that the market volatility since late July will in turn cause banks to further curtail credit in coming months, endangering a fragile economy.

In the three months ending in July, 56% of the 16 banks that make subprime loans toughened their standards, the Fed found. This was roughly the same percentage that tightened standards in the first quarter.

The survey found 40% of banks raised standards for obtaining a nontraditional mortgage, compared with 46% in the first three months of the year.

Meanwhile, 14.3% of banks made it harder to get a prime mortgage loan, compared with 15% in the first quarter.

The Fed also said 25% of banks surveyed raised standards for getting a commercial real estate loan.

No bank surveyed eased standards for those loans.
Over the past three months, demand for all three types of mortgage loans has weakened. Thirty-six percent of banks reported "moderately weaker" demand for prime mortgages, 21% of banks said demand for non-traditional mortgages was moderately weaker and 31% of banks said demand for subprime loans had gone down moderately.

On the other hand, the Fed survey found standards for commercial loans and consumer loans were unchanged.

In a special question, the Fed asked the banks about their involvement in the market for syndicated loans that have been at the heart of recent market turmoil.
The majority of the banks reported that 5% to 20% of their commercial loans were syndicated loans.

There were some exceptions. Three banks reported that more than 75% of their commercial loans were syndicated.

But almost two-thirds of the banks said only 5% of their holdings were leveraged loans.
In general, foreign banks operating in the U.S. has greater exposure to syndicated loans, the survey found.

The Fed's survey is based on responses from 53 U.S. banks and 20 foreign banks.

Jacksonville Bad Credit Mortgage is still available through Five Stars Mortgage.

Thursday, August 9, 2007

Countrywide Punished Over Quarterly SEC Filing Disclosures

Countrywide Financial Corp. (NYSE:CFC) has filed its 10-Q quarterly report with the SEC, and the stock has gotten hammered in after-hours trading with a drop of more than 10%. Investors should understand that many of these comments may have been included in prior filings and may have already been telegraphed by the company. But right now in our credit crunch and liquidity squeeze Wall Street is just shooting first. It isn't even that they will ask questions later, because right now it's just a status of shooting and walking away.

Many of the pre-packaged quarterly disclosure statements and possible scenarios outlined herein sound ghastly as well, but these are frequently covered as risk factors in every filing. After a huge down day like today, it's no wonder that after-hours trading is being so hard on Countrywide. After this reaction to a quarterly filing, you can bet that Countrywide's CEO Angelo Mozilo will be on CNBC and elsewhere in media outlets Friday trying to bring about at least some calm and to state that many of these disclosures are routine (or at least somewhat) in the sector.

The company has also said that it believes the changes may hurt near-term but will ultimately help it in the long-run. (If this was truly believed on the surface, then the shares wouldn't be down over 10% in after-hours.)

Page 94 OFF BALANCE SHEET TRANSACTIONS ....We do not believe that any of our off-balance sheet arrangements have had, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources. Our material contractual obligations were summarized and included in our 2006 Annual Report. There have been no material changes outside the ordinary course of our business in the contractual obligations as summarized in our 2006 Annual Report during the six months ended June 30, 2007.

Here are some of the comments on the next page out of the end of the SEC filing that are hitting the stock:

We believe the current environment of rapidly changing and evolving markets will provide increasing challenges for the financial services sector, including Countrywide. Specifically, in the near term, we may experience: · Continued pressure on housing values and mortgage origination volumes · Increasing delinquencies and foreclosures · Continued disruptions in the secondary mortgage and debt capital markets and · More restrictive legislative and regulatory environments. As a result of these conditions, Countrywide and other lenders may be experiencing, among other things, the following: · Lower loan production volumes · Lower margins on loans produced · Higher credit losses on delinquent loans and subordinated interests · Reduced access to secondary mortgage and debt capital markets and · Increased cost of debt. In response to the current environment, Countrywide is making changes to tighten the underwriting guidelines for loan products offered and adjusting loan pricing to reflect market conditions. Further reductions in the Company’s funding volume could result. Additionally, we expect to retain more loans in our portfolio of loans held for investment or to hold additional loan or security inventory until market conditions improve. In an effort to ensure the adequacy of our funding liquidity, we continue to transition to more reliable funding sources, which may be more costly. We are also optimizing our organizational structure through, among other things, the planned integration of Countrywide Bank and Countrywide Home Loans. While we expect these conditions may impact our earnings in the near term, we believe that the challenges facing the industry should ultimately benefit Countrywide as the mortgage lending industry continues to consolidate.

P. 96 Housing Values Housing values affect us in several ways...... Recently, we have seen housing price declines, including recent declines in housing values in many metropolitan statistical areas in the United States. We expect housing values to remain stagnant or decrease during the near term which will affect our credit loss experience and may affect our willingness to offer certain mortgage loan products, both of which could impact our earnings, particularly in the short term. Over the long term, we expect that housing appreciation will be positively correlated with both consumer price inflation and growth in personal income.

P.96-97 Secondary Mortgage Market Investor Demand Changes in investor demand for mortgage loans can have a significant impact on our ability to access the secondary mortgage market as a competitive outlet. In 2007, we have seen an increase in investor required yields, first for nonprime loans or securities followed by prime home equity loans and then nonconforming loans, together with a lessening in the liquidity of such loans and securities caused by reduced investor demand. In addition, certain credit rating agencies have announced that changes are pending to their securitization ratings protocol. These factors have reduced our ability and willingness to sell such loans or securities into the secondary mortgage market and the availability and pricing of such loans to consumers. Our gain on sale margin may be impacted in the short term .

P. 97 Impact of Declines in Credit Performance
With the current contraction in the U.S. housing market and the resulting slowdown in price appreciation (or price depreciation in many markets), along with worsening economic conditions, we may experience increased credit losses in the near term. In 2007, we have observed a marked decline in credit performance (as adjusted for age) for recent vintages, especially those loans with higher risk characteristics, including reduced documentation, higher loan-to-value ratios or weak credit scores. Deterioration in the credit performance of these loans has resulted in increased credit losses and impairment of our related credit-subordinated interests and higher claims under our representations and warranties. Credit markets are rapidly changing and evolving and we expect these changes to impact the housing market, demand for our mortgage-backed securities, our future credit losses and the availability of credit enhancements for the loans and securities we sell and invest in, which may impact future earnings.

P. 97 Funding Liquidity In the third quarter through the filing date of this Form 10-Q, funding liquidity in the financial services sector was constrained primarily due to changes in secondary mortgage market investor demand. Various mortgage lenders have experienced operating difficulties and have extended asset-backed commercial paper facilities or filed for bankruptcy protection. These events have further constrained funding liquidity in the sector. We have maintained access to our traditional, highly reliable short-term liquidity sources. In view of current unprecedented market conditions, we are accessing other pre-existing funding liquidity sources, procuring new sources and accelerating the integration of our mortgage company with the Bank. As a result of this accelerated integration, a significantly higher percentage of our mortgage banking fundings will occur in the Bank sooner than originally planned. The Bank has significant liquidity sources available to fund our mortgage banking operations. While we believe we have adequate funding liquidity, the situation is rapidly evolving and the impact on the Company is unknown.

Right now opinion on this won't matter. A drop of this magnitude is hard to ignore, and this puts the stock back within striking distance of a 52-week low.

Five Stars Mortgage is continuing to offer Orlando Bad Credit Mortgages to Florida. 100% Financing company is still servicing a damaged market.

Wednesday, August 8, 2007

Delta Financial slumps after postponing results

The company was scheduled to release results before the stock market opened on Wednesday. However, Delta Financial corp posted a short statement on the homepage of its Web site on Wednesday that said the earnings have been postponed.

Delta didn't give a reason why it delayed the report and didn't say when the results may be released in future. Larry Karpen, a vice president at Delta Financial, declined to comment.
Delta Financial shares slumped $3.20 to close at $4.75 on Wednesday. That leaves the stock down more than 50% so far this year.

Delta Financial specializes in mortgages that don't conform to the standards of government sponsored enterprises such as Fannie Mae.

The company offers subprime home loans to less creditworthy borrowers. However, it focuses on mainly fixed-rate mortgages and has shunned some of the riskier products that have got some of its rivals into so much trouble this year.

Delta Financial Chief Executive Hugh Miller highlighted those attributes during the company's annual meeting in May.

Rather than attempt to quickly gain market share, "we maintained our guidelines and originated loan products that made sense for us and our borrowers," Miller said. "Although it remains a challenging environment, we firmly believe the remaining competitive landscape -- especially in the wholesale channel -- will allow us to capitalize on both short-and long-term opportunities in the market."

That was reflected in the performance of Delta's shares earlier this year. The stock fell in February and March when the first signs of big trouble in the subprime mortgage market emerged. However, the shares rallied strongly in April and May and held on to those gains through June. At the end of June, the shares were up more than 20% in 2007.

But subprime home loan problems have spread to other parts of the mortgage market recently. American Home Mortgage , the 10th largest mortgage lender in the U.S. which originated very few subprime home loans, filed for bankruptcy this week. Several companies have said that parts of the secondary mortgage market have seized up as investors stop buying some types of loans.
As problems spread beyond subprime, Delta Financial shares slumped. The stock has lost 55% of its value since the end of June.

Five Stars Mortgage still providing Deltona Florida Bad Credit Loans to it's clients despite market turmoil.

Tuesday, August 7, 2007

American Home's downfall stretches risks

BOSTON (MarketWatch) -- American Home Mortgage Investment Corp.'s rapid slide into Chapter 11 is a stark reminder that instability in the subprime-mortgage market is rippling into higher-quality loans, an attorney specializing in bankruptcy restructuring said Tuesday.

"American Home Mortgage is going down and it's not a subprime originator, so it looks like it's a step up the ladder in terms of turmoil in the mortgage market," said Vincent Slusher, a partner at Beirne, Maynard & Parsons LLC in a telephone interview.

"If it continues up the chain, it's tough to say what might happen," he said.
American Home Mortgage's demise sounded alarm bells because the real estate investment trust dealt in so-called Alt-A mortgages, which are offered to more creditworthy borrowers than subprime loans, but they often have adjustable rates and sometimes require little or no documentation.

Highlighting the spreading damage in the mortgage market, Standard & Poor's said on Tuesday that it may downgrade 207 classes of Alt-A residential mortgage-backed securities because of rising delinquencies on the underlying home loans. The underlying loans were offered from the beginning of October 2005 through the end of December 2006, the ratings agency noted.

"The collateral underlying the Alt-A transactions has been experiencing high levels of severe delinquencies that have not abated," S&P said. Alt-A loans represented 20% of the mortgage market in 2006 by estimated purchase dollar originations, while subprime also accounted for 20%, according to Credit Suisse.

Meanwhile, Slusher also pointed to substantial doubt in the market for mortgage-backed securities, which are packages of loans that are securitized and sold to investors.

Large financial institutions holding these securities are feeling the pinch as their values are being marked down with delinquencies up and the housing market on ice. If pessimism in the MBS market continues or worsens, "there could be a severe liquidity crisis," Slusher observed.
The recent decline in shares of Bear Stearns Cos. (BSC : The Bear Stearns Companies Inc
News , chart , profile , more and the departure of a key executive are more signs that investors are uncertain how deep into credit markets the pain could spread. S&P last week lowered its outlook on the company due to exposure to mortgage-backed securities and leveraged buyouts, another market that is slowing.

"Staid, solid investment houses and investment banks getting caught up in some of the mess is an indication that there's some exposure that could be pretty widespread," Slusher said.
He compared the situation to the run of bank failures in the late 1980s.

"There was a lot of money in the marketplace that needed someplace to land," the lawyer said.

"Whenever more dollars are chasing a limited number of outlets, lending requirements are lessened and riskier loans are made, which results in higher default rates eventually."
The mortgage market has almost ground to a halt on the subprime fears, and all lenders "are caught up in the crunch because they don't have funds to make mortgage loans."

Additionally, Slusher said he's seeing a "minor" increase in bankruptcy filings in the real estate sector in both Florida residential and commercial companies, which are holding land for development longer than anticipated, which creates "liquidity problems."

Home buyers should expect mortgage rates to rise more, the lawyer said.

"There will be tougher underwriting requirements in terms of down payments and required equity to lessen lender risk," said Slusher. And as rates jump and monthly payments on adjustable-rate mortgages reset higher and bump up monthly payments, default rates should increase even more, he said.

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