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Thursday, February 28, 2008

Housing/Subprime Roundup — Feb. 28, 2008

Items of interest:

Todd Harrison / Minyanville:
The Hatfields and McCoys -- Hatfields? McCoys? No, not Julie--although she was Minxy—I'm talking about Aunt Fannie (FNM) and Uncle Freddie (FRE). For those who haven’t been following this Family Feud (read: for those enjoying life!) there is an old school shootout going down. [...]

With that said, I believe the potential that these companies will eventually be nationalized is a much higher probability than most folks currently assign. The “when” and "why" remain to be seen, making the path that we take to get there entirely more important than the destination.

The bottom line is this: If MBIA (MBI) and Ambac (ABK) are deemed too big to fail—which is inferred by the semantic socialization we’ve seen—Fannie and Freddie will be protected from up on high by the Prince of Darkness.

Food for thought as we figure it all out. [...]

Light Bulb Flashes in Wells Fargo's Head -- Reuters published an article today highlighting a memo that Wells Fargo sent to its wholesale brokers on February 25th. Below is an excerpt from the story:
Wells Fargo said it has identified more than 200 U.S. counties with troubled housing markets, showing how falling home prices and rising defaults are no longer concentrated in particular regions.

Wells Fargo is tightening its lending standards in the affected markets effective Feb 29, in many cases by limiting the maximum size of loans as a percentage of home values. In some markets, it will not allow prospective purchasers to borrow more than 75 percent of the value of their homes.
Congrats to the super sleuths at Wells Fargo for realizing that housing markets have declined! Now that prices are down significantly from their peaks in 2005, they've finally begun tightening lending standards, making it harder for potential buyers to make purchases at much lower prices. [...]
Bill Gross, Pimco:
Investment Outlook: No Country for Old Maids -- Yet those that claim that the Old Maid necessarily resides in a deck composed of mortgage loans are missing the larger point. This parlor game is best defined by leverage and not the assets that have been dealt out to more than willing players over the past decade. That subprimes have garnered the headlines is only because they were the asset class that failed first. Now as the U.S. economy slows to what Alan Greenspan labels “stall speed,” levered structures holding commercial loans, and auto and credit card receivables are the new Babes in waiting – waiting to be exposed for what some of them could be: Old Maids with collagen carelessly injected by Moody’s and S&P. [...]

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia