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Thursday, January 31, 2008

The Repo People Cometh: All Aboard Foreclosure Bus Tours

Foreclosure Bus ToursItems of Interest:

ABC News:
All Aboard the Home Foreclosure Bus Tour -- With home foreclosures at a 20-year record high in California and up 68 percent nationwide, real estate agents are trying out new ideas to keep the housing market alive.

Foreclosure bus tours in which home buyers visit a number of foreclosed properties in one outing, are popping up across the country.

At one tour in Pismo Beach, Calif., 40 prospective homebuyers spent four hours on a bus, checking out 10 homes, all at fire sale prices. [...]
CBS News:
One Man's Foreclosure, Another Man's Steal -- Wave Of Foreclosures In Calif. Takes Auction Home Prices Way Down, To The Delight Of Buyers [...]

Street Insider
San Diego's Finest Real Estate Commences Foreclosure Bus Tours -- To showcase some of the best deals among hundreds of properties that have been repossessed by lenders in San Diego County, San Diego's Finest Real Estate (SDFRE) is launching the "Great American Dream Home Tour." In February and March, the company will take prospective buyers on a four-hour guided search for bargains within the San Diego residential foreclosure market. The tour's first stop: Solana Beach, Del Mar and Carmel Valley on Saturday, Feb. 9 from 9 a.m. - 1:00 p.m.

"The real estate market in San Diego has made a nice correction and now is a great time to buy a home or condo, especially if you take advantage of bank-owned foreclosures," said Anne-marie Boyer, a SDFRE broker. "Lenders are being aggressive and the banks are actually required by law to get foreclosures off their books, so it's a great time to invest."

Large inventories of these real-estate-owned (REO) properties have made lenders increasingly willing to negotiate. Many of the homes and condos that will be seen on SDFRE's foreclosure tours have been marked down tens of thousands of dollars below the original asking prices. [...]

Housing Bubble Blog: The Housing Market Continues To Correct
ABC News:
Pets Abandoned by Owners After Foreclosure -- The house was ravaged -- its floors ripped, walls busted and lights smashed by owners who trashed their home before a bank foreclosed on it. Hidden in the wreckage was an abandoned member of the family: a starving pit bull.

The dog found by workers was too far gone to save -- another example of how pets are becoming the newest victims of the nation's mortgage crisis as homeowners leave animals behind when they can no longer afford their property.

Pets "are getting dumped all over," said Traci Jennings, president of the Humane Society of Stanislaus County in northern California [...]
The Big Picture:
Financial Sector: More Damage to Come -- Someone needs to inform the SEC that their job is to protect shareholders -- not wayward corporate management.

For an SEC commission staff to even hint that its okay to move sub-prime junk off balance sheets is not only wrong -- its outside of their jurisdiction. That's FASB's purview, not the SEC. The goal should be accurate, transparent accounting -- not sleight of hand and misdirection.

Allowing this kind of misleading reportage is simply unacceptable gimmickry from the regulatory body that is SUPPOSED TO STOP this sort of crap [...]

Wednesday, January 30, 2008

Suprime Trashes Euro Banks

Bernanke options?Items of interest:

UBS, BNP Paribas reveal fresh hits from credit crisis -- UBS to take $14 bln write-off as it swings to loss; BNP sees profit down 40%

Two of Europe's largest banks revealed fresh problems stemming from the U.S. housing downturn Wednesday. Swiss banking giant UBS extended its latest write-down to $14 billion and France's BNP Paribas said its quarterly profit will slump over 40%.

In a surprise update to the market, UBS said it will post a fourth-quarter loss of around 12.5 billion Swiss francs ($11.4 billion), down from a profit of 3.4 billion francs a year ago and well below the consensus forecast for a loss of 7.5 billion francs.

The result will drag its bottom line for the year down to a loss of 4.4 billion francs.

UBS said the loss reflects fourth-quarter write-downs of $14 billion, including $12 billion related to subprime mortgages and the rest from "other positions" linked to U.S. residential mortgages.

The write-downs were significantly worse than the $10 billion the bank predicted in December, when it said it may swing to a loss for the year and announced plans for an $11.5 billion capital injection. [...]
UBS Takes a $14 Billion Write-Off - NY Times
UBS Drag, FBI Dragnet - Harold Maass, yahoo
Business Week:
Mortgage application volume rises -- Mortgage application volume rose 7.5 percent during the week ended Jan. 25, according to the trade group Mortgage Bankers Association's weekly application survey.

The MBA's application index rose to 1,054.9 from 981.5 the previous week.

Application volume was pushed higher by a jump in refinance volume. Refinance application volume increased 22.1 percent, while purchase volume tumbled 17.7 percent. Refinance applications accounted for 73 percent of total applications.

The index peaked at 1,856.7 during the week ending May 30, 2003, at the height of the housing boom.

An index value of 100 is equal to the application volume on March 16, 1990, the first week the MBA tracked application volume. A reading of 1,054.9 means mortgage application activity is 10.549 times higher than it was when the MBA began tracking the data. [...]
Financial Times:
US homebuilders face growing bankruptcy threat -- The risk of bankruptcies among the big US homebuilders has risen sharply as the economy has weakened and an end to the housing slump remains distant.

Credit default swaps on homebuilders, which act as insurance on corporate debt, suggest some of the biggest are at risk of failing to keep up debt payments. According to Byron Douglass, an analysts at Credit Derivatives Research, the most exposed are Standard Pacific, Hovnanian, Beazer, and Meritage . All are among the top 15 publicly-listed US homebuilders.

On Tuesday Tousa, formerly called Technical Olympic, became the largest homebuilder so far to file for bankruptcy. At least 13 other homebuilders have gone bankrupt since June, according to Bloomberg data.[...]
Tousa, Florida Homebuilder, Files for Bankruptcy -- Tousa Inc., the homebuilder that lost 98 percent of its market value in the past year, sought bankruptcy protection as the Florida housing market's decline deepened.

The company, based in Hollywood, Florida, listed assets of $2.3 billion and debt of $1.8 billion in a Chapter 11 petition filed today in U.S. Bankruptcy Court in Fort Lauderdale, Florida. There were 37 affiliates that also filed today.

Tousa, the largest builder by assets and debts in bankruptcy and at least the 14th to file since June, missed three interest payments this month as home sales and prices fell in Florida, where the company does most of its business. The builder never recovered from the August 2005 purchase of Transeastern Properties Inc., a closely held Coral Springs, Florida-based homebuilder, said Robert Curran, a managing director at Fitch Ratings in New York who covers builders. [...]

Tuesday, January 29, 2008

More Housing Wacks

Items of Interest:

AP / USA Today:
Homes in foreclosure rose 79% in '07 -- The number of U.S. homes that slipped into some stage of foreclosure in 2007 was 79% higher than in the previous year, a real estate tracking company said Tuesday. Many homeowners started to fall behind on mortgage payments in the last three months, setting the stage for more foreclosures this year.

About 1.3 million homes received foreclosure-related warnings last year, up from 717,522 in 2006, Irvine-based RealtyTrac Inc. said. Foreclosure filings rose 75% from the previous year to 2.2 million.

More than 1% of all U.S. households were in some phase of the foreclosure process last year, up from about half a percent in 2006, RealtyTrac said. [...]

2007 filings
Change from 2006


Foreclosure filings by year
2005 - 885,468
2006 - 1,259,118
2007 - 2,203,295 [35% in California & Florida]
Source: RealtyTrac

Reuters: Countrywide: 1 in 3 subprime mortgages delinquent

You Walk AwayYouWalkAway.com -- Is Foreclosure Right for You

If you are facing or considering foreclosure, you're not alone. [...]

discussion: The Big Picture
Seeking Alpha:
Case-Shiller Housing Index Continues to Slide -- For those watching the Standard & Poor's/Case-Shiller Home Price Indexes these past couple of years, it's been a bit like watching progressive freeze frames of a car accident. The indexes measure the changes in the prices of existing single-family homes, which have not been doing well at all. With every monthly announcement, the disaster becomes more gruesome, and the November reading—released today—is no exception.

The October results, released shortly after Christmas, saw the 10-City Composite achieve an annual decline of 6.7%, beating a 16-year-old record, and the record-breaking continued in November, with that decline increasing to 8.4%. Meanwhile, the newer 20-City Composite, which only has data going back to 2000, was down 7.7%. October 2007 is the 11th month of negative annual returns and the second full year of decelerating returns, meaning the growth of housing prices essentially ground to a halt two years ago and has been in the equivalent of a slow-motion free fall for almost a year. [...]

Case Shiller Nov 2007 housing pricesCase/Shiller Nov07 10 City index
Wall Street Journal: FBI Begins Subprime Inquiry [sub. required]

Housing Wire:
FBI Opens Wide-Ranging Subprime Mortgage Probe on 14 Firms -- Federal investigators at the FBI have opened a criminal investigation of 14 mortgage-related companies, focusing on alleged accounting fraud, insider trading and securitization practices, the Wall Street Journal reported Tuesday afternoon.

Even bankrupt firms aren’t free from the scrutiny, with the Journal quoting FBI economic crimes chief Neil Power as saying that investigators were combing the books of failed mortgage lenders to identify if evidence of wrongdoing exists — given that there aren’t that many really, really large failed lenders, it’s probably not too hard to guess which firms are included in that group of 14. Even if the FBI isn’t naming names right now. [...]

Bear, Goldman, Morgan Stanley probed on subprime -- Bear Stearns Cos, Goldman Sachs Group Inc and Morgan Stanley said on Tuesday that government investigators are seeking information from them about their subprime mortgage activities. [...]
Realty Check / CNBC:
Home Ownership Fading And So Is American Dream -- It’s not like you couldn’t have predicted this, but the home ownership rate in the U.S. fell in the fourth quarter of 2007 to its lowest level since the beginning of 2002--this from a record high in the middle of 2004. [...]

But what really gets me in this report released today from the U.S. Census is the little-reported homeowner vacancy rate. It’s up at 2.8 percent, [...]
Spot of good news?

Housing Wire:
Fannie’s Mudd: Boosting Loan Limit Will Provide Liquidity -- Fannie Mae CEO Daniel Mudd went on Bloomberg TV today to discuss the proposal being floated in Congress to temporarily boost the GSE conforming loan limit from its current level of $417,000. In his interview, he suggests that Fannie would be able to provide much-needed liquidity to the jumbo market — which he says represent “working class” mortgages for many borrowers. [...]

Subprime Wrecking Ball Continues to Swing

Subprime wrecking ball continues to swingItems of interest:

Countrywide Financial Posts Loss on Overdue Mortgages -- Countrywide Financial Corp., the mortgage lender that Bank of America Corp. plans to buy, lost $422 million in the fourth quarter, failing on its promise to return to profitability. The shares rose 7.4 percent as concern eased that Bank of America might renege on the takeover.

The net loss equaled 79 cents a share, compared with a profit of $621.6 million, or $1.01 a share, in the year-earlier period, the Calabasas, California-based company said in a statement today. The loss was more than twice the 28 cents predicted in a Bloomberg survey of analysts. [...]
Housing Wire: Countrywide’s Fourth Quarter: Ouch
Seeking Alpha:
Moody's CEO Wins the Blame-Shifting Prize -- Did you see what Raymond McDaniel, Moody's CEO, had to say in Davos last week about any blame the ratings agencies might deserve regarding the subprime mess? It's pretty shocking: "A lot of things could have been done better," he told a panel at the World Economic Forum. "Some are the responsibility of rating agencies, some of other participants in the market. In hindsight it is pretty clear to us there was a failure in some key assumptions supporting our analytics and our models. The key assumptions failed in part because the information policy, completeness and veracity feeding the work agencies were doing, was deteriorating." [Emph. added]

How pathetic. [...]
The Anasazi in TemeculaInfectious Greed:
The Anasazi in Temecula -- I got to thinking about the Anasazi while driving from San Diego to Palm Desert today. North of San Diego, a little southeast of Los Angeles, there is a city called Temecula. It has grown incredibly over the last 20 years, largely with people priced out of the L.A. and Orange County (and even San Diego) markets buying real estate there, and then enduring monstrous commutes.

You have to see it to believe it. Chaparral-clad high-desert hillsides are paint-gunned with subdivisions, most of which look alien, more like they fell from space [...]
Daily Reckoning:
U.S. Housing Stocks Down $2 Trillion -- A trillion here…a trillion there…pretty soon you’re talking real money.

U.S. stocks are down about 10% so far this year…that’s about $1.5 trillion lost. U.S. housing stock is said to be down about $2 trillion. And losses from subprime, credit cards, home equity lines, rogue traders…and hanky panky…probably add up to another trillion or so.

And let’s not forget the cost of the War Against Nobody in Particular – the war on terror…which costs a couple hundred billion.

And now, along comes…what’s this…a bi-partisan giveaway of tax rebates! Yes, it’s in today’s news. The Dems and the Reps have agreed to give taxpayers back some of their money. And Treasury secretary Paulson appeared in Congress telling them to get a move on. If they don’t get those checks out soon, it will be too late. [...]

Monday, January 28, 2008

Billions in Chump Change

Items of interest:

Given the logic of Wall Street, rogue trader Jérôme Kerviel, who lost $7 billion, should be the hottest of hot investment managers.

hot investment managersNY Times:
What’s $34 Billion on Wall Street? -- UNDER the stewardship of Dow Kim and Thomas G. Maheras, Merrill Lynch and Citigroup built positions in subprime-related securities that led to $34 billion in write-downs last year. The debacle cost chief executives their jobs and brought two of the world’s premier financial institutions to their knees.

In any other industry, Mr. Kim and Mr. Maheras would be pariahs. But in the looking-glass world of Wall Street, they — and others like them — are hot properties. The two executives are well on their way to reviving their careers, even as global markets shudder at the prospect that Merrill and Citigroup may report further subprime losses in the coming months.

Mr. Maheras, who left his job as co-president of Citigroup’s investment bank this fall after being demoted, has had serious discussions with several investment banks, including Bear Stearns, about taking on a top management position, people who have been briefed on the situation said. And he has also been approached by investment firms willing to back him to the tune of $1 billion or more if he decides to start his own hedge fund, these people said. [...]

Jeff Matthews:
New Fed Policy: 'No Rogue Trader Left Behind'
CBS 60 Minutes discovers subprime meltdownCBS 60 Minutes / Yahoo:
The Subprime Meltdown [video] -- By now, everyone has heard of "the subprime mortgage meltdown." It began in the U.S. but its effects are worldwide. Banks lent hundreds of billions of dollars to homebuyers who can't pay them back. Wall Street took the risky debt, dressed it up as fancy securities, and sold it around the world as safe investments. Steve Kroft focuses on one hard hit city: Stockton, California.
Infectious Greed: 60 Minutes Discovers Subprime
Calculated Risk: 60 Minutes: House of Cards

Friday, January 25, 2008

New Conforming Loan Cap Will Prop Up Housing

Items of interest:

Mortgage industry cheers stimulus proposal -- OFHEO disagrees, says reform to Fannie, Freddie should come first

Rates on jumbo loans got a lot more expensive after last summer's credit crunch, and the mortgage and real-estate industries have been calling for an increase to the conforming loan limit as a way to help more borrowers obtain favorable mortgage rates. On Thursday, they had reason to believe their wish would be granted when a proposed economic stimulus plan included a new conforming loan cap.

According to the proposal, the temporary limit for loans that can be bought by Fannie Mae and Freddie Mac, government-sponsored mortgage agencies, would be $729,750, or 125% of the median house price in the area.

The current conforming loan limit is $417,000; loans larger than that are considered jumbo and aren't eligible to be financed through government-sponsored enterprises.[...]

GSE Loan Limit And A Shift In Fannie Mae's Mission? - Realty Check blog, CNBC
Reality Check on Raising Mortgage Caps - Herb Greenburg, MarketWatch
Raising conforming limits would be a worse idea if more people qualified - Housing Doom

Thursday, January 24, 2008

Now is the Time to Refinance

Economic stimulus package: Tickle, tickle, tickleItems of interest:

Wall Street Journal:
Now Is the Time to Refinance -- If you haven't refinanced your mortgage recently, do it now.

Loan rates have slumped again in the past few days amid the world-wide stock market rout, but it's anyone's guess how long this opportunity will last.

Earlier this month I pointed out that rates on 30-year loans had fallen below 6%. But if that was a deal, what has happened since is a bargain. The rate on a typical 30-year fixed rate loan has now fallen to as little as 5.31%, according to Bankrate.com.

And you can find one or two rates down around 5% a year. That's for people borrowing $417,000 or less, with good credit, and a down payment of at least 20%.

The current averages are among the lowest seen in recent history, and they're a full percentage point or more below levels seen as recently as last fall.

Some borrowers are already taking advantage. Veteran mortgage broker Paul Sapienza, a partner of Boston-area Drew Mortgage Associates, says business has skyrocketed this week. "It's very busy -- it's night and day from a week ago," he says. Borrowers are grabbing 30-year fixed loans, he says. "I've written more [new mortgages] in the last day than I did in the previous three weeks." [...]
LA Times:
Homeowners deluge mortgage brokers
Bankrate: Mortgage Rates Lowest Since March 2004
Office of the Governor / Arnold Schwarzennegger Press Release:
Governor Schwarzenegger Lobbies Congress for California Homebuyer Assistance -- Governor Schwarzenegger yesterday sent the following letter to Congressional leaders to raise limits for government loan programs, which would help more Californians keep their homes and make additional homebuyers eligible for government-backed loan programs. The Governor also urged Congress to provide additional funding for credit counseling and foreclosure assistance to help distressed borrowers find their way out of further financial distress. [...]

Just when the safety and affordability of FHA-insured loans are needed most, they have virtually disappeared from the California marketplace. The current FHA loan limit is $362,790, well below the median-priced home in California. In testimony before the U.S. Senate Committee on Banking, Housing and Urban Affairs this summer, Brian D. Montgomery, U.S. Department of Housing and Urban Development Assistant Secretary for Housing, said California has "seen its [FHA] loan volume drop from 109,074 to just 2,599; that's a decline of 98 percent and a loss of $13.6 billion." This has been a significant factor in the increasing use of nontraditional mortgage products in California. The prospect of mounting losses on nontraditional mortgages has harmed the availability of home financing nationwide.

Increasing the FHA loan limit [conforming loan limit] would have a positive impact on expanding financing options for hardworking Californians hoping to obtain a piece of the American Dream [...]
Housing bailout: winners and losers -- Four plans are on the table. Who stands to gain, and who gets left out?
Financial Times:
Dodd seeks ‘ambitious’ financial rescue plan -- Mr Dodd also said he wanted the administration to raise the size of loans that the mortgage lenders Fannie Mae and Freddie Mac are allowed to buy – the so-called conforming loan limit – to ease liquidity in the mortgage market.
Merrill Lynch says U.S. nationwide home prices may fall 30% -- Merrill Lynch forecasts nationwide U.S. home prices could decline 25% to 30% over the next three years, as new supply and weak demand weigh on the market. "This sounds dire... but would only reverse part of the unprecedented 130% price surge from 2000 to 2006," wrote economist David Rosenberg in a research note released Wednesday. Rosenberg added the S&P 500 may decline an additional 20% to 25% to breach the 1,100-point level if the market follows historical precedents at times when the U.S. economy is in recession.

Wednesday, January 23, 2008

Second Guessing Ben Bernanke

Ben Bernanke action figureItems of interest:
George Soros / Financial Times:
The worst market crisis in 60 years -- The current financial crisis was precipitated by a bubble in the US housing market. In some ways it resembles other crises that have occurred since the end of the second world war at intervals ranging from four to 10 years.

However, there is a profound difference: the current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency. The periodic crises were part of a larger boom-bust process. The current crisis is the culmination of a super-boom that has lasted for more than 60 years.

Boom-bust processes usually revolve around credit and always involve a bias or misconception. This is usually a failure to recognise a reflexive, circular connection between the willingness to lend and the value of the collateral. Ease of credit generates demand that pushes up the value of property, which in turn increases the amount of credit available. A bubble starts when people buy houses in the expectation that they can refinance their mortgages at a profit. The recent US housing boom is a case in point. The 60-year super-boom is a more complicated case. [...]

Goop for global markets

Greenspan's Bubbles

Bill FleckensteinBill Fleckenstein is the president of Fleckenstein Capital, which manages a hedge fund based in Seattle. He writes financial commentary at his Fleckensteincapital.com website and for MSN Money. He has been a long time critic of Alan Greenspan's easy money policies.

Fleckenstein has co-written a book entitled, Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve, that will be published on February 11, 2008 by McGraw-Hill. The book is currently ranked #1,644 overall at Amazon and #1 in Money & Monetary Policy. He has a passionate following in the investor/financial community. His timing couldn't be better.

At Amazon.com: Bill Fleckenstein/Fredrick Sheehan - Greenspans BubblesFrom the Back Cover

“It's about time someone set the record straight! Fleckenstein chips away at Greenspan's overinflated record as Fed Chairman to reveal a legacy of lousy forecasts, poor judgment, and two huge asset bubbles. It's devastating or delicious, depending on whether you're Greenspan or the reader.”-Caroline Baum, columnist, Bloomberg News

“After reading Greenspan's Bubbles you will have no respect for the Fed! It's a must-read…in it, the authors demystify the belief that the Fed 'solves' problems when, in fact, it is directly responsible for a colossal destruction of wealth of the median household and of the U.S. currency through its irresponsible monetary policies.”-Marc Faber, editor of the Gloom, Boom & Doom Report

“Greenspan for Mt. Rushmore? Not if Bill Fleckenstein has anything to say about it.”-James Grant, editor of Grant's Interest Rate Observer

“In his typically engaging style, Bill Fleckenstein pops the Greenspan bubble…presenting compelling and convincing evidence that the former Fed chief got us into this mess...”-Herb Greenberg, Senior Columnist, MarketWatch.com
Here is one of Fleckenstein's recent MSN Money broadsides at Alan Greenspan.

Bill Fleckenstein / MSN Money:
How Greenspan's policies hurt you -- Most Americans are likely to be worse off for years to come because of the bubbles created when the former chairman ran the Federal Reserve.
"Those who cannot remember the past are condemned to repeat it." -- George Santayana, "The Life of Reason"
A debate has emerged in this country regarding the legacy Alan Greenspan has left after his nearly 19 years as chairman of the Federal Reserve. Some have argued that Greenspan ushered in an era of prosperity. Others would counter that his decisions have nearly led to the decimation of the world's largest financial system. Who is correct?

If Wall Street had a chisel, Alan Greenspan's smiling face would today be carved on Mount Rushmore. From the late 1980s until just recently, the Maestro, as an admiring journalist styled him, could seemingly do no wrong. He set interest rates -- always, so his fans insisted, the right rates. He presided over an economy that only rarely stumbled into recession or crisis. And when it did lose its way, the Greenspan Fed could be counted on to ease the pain with freshly printed dollars and low interest rates. [...]

during [Greenspan's] reign, the United States experienced a bubble in stocks and then in real estate. These two massive bubbles emerged within 10 years of each other. Prior to Greenspan's arrival at the Fed, excluding the brief mania for commodities and precious metals from late 1979 to early 1980, the country had been bubble-free for more than 50 years. [...]

Down through financial history, markets have intermittently gone to excess. Prices go to the sky and then fall through the floor. Human beings can't help themselves. But the bubbles in U.S. stocks and real estate didn't just happen. To a degree that the American public has not yet fully realized, these costly distortions were instigated and financed by the Federal Reserve -- Alan Greenspan's Federal Reserve.

Tuesday, January 22, 2008

$417K Conforming Loan Limit - How Important to Housing Market?

A conforming loan is a mortgage loan that conforms to GSE (Fannie Mae & Freddie Mac) guidelines. Fannie and Freddie have created a secondary market in these loans through securitization so that the primary market debt issues can be bought and — most importantly — traded by investors. The current conforming loan limit for a single family mortgage is $417,000.

This level is too low for financing many homes especially in high cost housing areas like: California, the Northeast, and Washington, D.C.

Presently, rates for conforming loan mortgages are below 6% and jumbo mortgage rates are above 7%. That is a very big difference in terms of affordability and what the monthly payments are.

The limit has become an important debating point regarding the economic stimulus package and putting the brakes on the credit crisis.

The real estate profession wants the loan limit raised.

REALTORS: Stimulus Package Must Include Loan Limit Increase to Help Homeowners, Economy --

The National Association of Realtors (NAR) has been calling on Congress and the administration to increase the loan limits for Fannie Mae and Freddie Mac from the current ceiling of $417,000 to $625,000. “This change will permit more families to enter the housing market by making more mortgages available with lower interest rates. Increased home sales will lower inventories and immediately start stabilizing the housing market and the economy,” Gaylord said.
Henry PaulsonThis morning Treasury Sec. Paulson said:
Congress needs to pass legislation to modernize the FHA, to increase availability of affordable FHA mortgages. It needs to strengthen regulatory oversight of Fannie Mae and Freddie Mac to ensure they will continue to fulfill their affordable mortgage financing mission. And as part of this reform, to temporarily raise the loan limit on conforming mortgages for securitization. Congress should also allow states to issue tax-exempt bonds to raise funds for innovative refinancing programs.

I am confident that Congress and the Administration share a sense of urgency and will work together to address the economy''s short-term needs. I look forward to engaging intensely with the Congress to get money into our economy quickly. [...]
Will Congress take action on the conforming loan limit in a timely manner? Raising the limit requires no spending, no tax increase, nothing more than written authorization. But, would you bet on Congress to take this simple, but important action soon?

US Senate leader Reid says Congress must get stimulus bill done by mid-February --
The Senate Majority Leader, Harry Reid, today said Congress and the Bush administration must pass an economic stimulus package by mid-February so as to ensure the economic pump is primed before President's Day recess next month.

'We have three more weeks until we have the President's Day weekend, and we need to have something on the president's desk by then,' Nevada Democrat Harry Reid in a meeting with congressional leaders and US Treasury Secretary Henry Paulson. [...]

Seeking Alpha:
Housing Market Tracker - Subprime Outlook --
Closing Costs "[The only mortgages] left for mortgage brokers largely are... [government-backed]“conforming loans,” of less than $417,000... Brokers say it’s not for lack of demand for subprime, jumbo and other loans. Mortgage Bankers Association: Earlier this month, mortgage applications surged to a four-year high on lowered interest rates. But lenders’ appetite for loans has dried up, brokers say, as banks and others see losses from risky mortgages made during the boom." (Orange County Business Journal, Jan. 21st)

Economic Stimulus Plans: The Good, the Hopeful and the Dubious "Fannie Mae (FNM) and Freddie Mac (FRE) are seen as unfairly competing with private enterprise... We believe that housing progress requires an increase in the conforming loan limit from the current $417,000. This would reflect actual pricing in much of the country. The House has passed such a bill. A temporary increase has been endorsed by both Bernanke and Treasury Secretary Paulson... [But] there is the possibility that election-year posturing could scuttle any plan. [...]
Realty Check blog:
Fed Cut: What It Means For Your Mortgage -- So does this cut stem the foreclosure crisis? Maybe a bit on the margins, but not really, and here’s why: the bulk of the folks facing foreclosure because they can't make their monthly payments have no equity in their homes and no money to put down on a refinance.

While rates might be lower, this is a market where lenders and investors are much more aware of risk and will gravitate toward borrowers that represent less risk. So many folks will still find themselves in trouble. For people who are having trouble paying the initial rate on the loan, forget it. No help there. [...]
But what good is a increase in the conforming loan limit if Fannie and Freddie go bust?

Credit Suisse estimates that both Fannie Mae and Freddie Mac face $16 billion in losses for the fourth quarter --
The government-chartered companies’ earnings and capital haven’t yet been hurt by declines in the $230 billion of AAA rated “non-agency” mortgage-backed bonds they hold, according to New York-based analysts Moshe Orenbuch and Kerry Hueston …

With other financial companies this quarter already reporting “other than temporary impairments” of mortgage-related holdings that they wouldn’t normally need to report under accounting rules, Fannie Mae and Freddie Mac may need to follow suit, the analysts wrote in a report today.

“We believe that this will likely spur the GSEs’ regulator to compel similar actions,” they wrote, referring to the Office of Federal Housing Enterprise Oversight, regulator to the so-called government-sponsored enterprises.

McLean, Virginia-based Freddie Mac’s subprime securities may be worth $8 billion to $11 billion less than the prices at which the company is carrying them on its books, while Washington-based Fannie Mae’s bonds may be worth $2.25 billion to $5 billion less, according to Credit Suisse.

Fed Steps in with Rate Cut to stem Panic

Time to panic?---
Bears roarBloomberg:
Stock Tumble Drives 43 Benchmarks Into Bear Market -- More than half of the world's biggest stock indexes fell into a bear market as mounting concern about a U.S. recession dragged down banking and retail shares across Asia, Europe and Latin America.

The MSCI World Index's 3 percent decline yesterday, the steepest since 2002, left benchmarks in France, Mexico, Italy and 35 other countries at least 20 percent below their recent highs. Declines today turned Indonesia, India, the Philippines, Taiwan and Thailand into bear markets as well. [...]

Blown Mortgage:
Helicopter Ben Slashes Rates .75% --

Helicopter Ben
From Market Watch:
Acting forcefully against economic risk and financial market meltdown, the Federal Reserve cut its overnight lending rate by 75 basis points to 3.50%, the Fed announced Tuesday. It was the first time the Fed had cut interest rates between meetings since the 9/11 attacks in 2001. “The committee took this action in view of a weakening economic outlook and increasing downside risks to growth,” the Federal Open Market Committee said in a statement.
Dow Jones AM ticker: stocks poised for lossesInt'l Herald Tribune:
Fed's deep rate cut seen as 'once-in-a- generation' -- "It's a once-in-a-generation event," Mark Zandi, chief economist at Moody's Economy.com, said. In recent years, the Fed has rarely acted between scheduled meetings of the committee, and almost always in increments of one-quarter or one-half point. It was the biggest single cut since October 1984. [...]
Global Selloff Reveals Decoupling Myth - Editorial, Wall Street Journal
Flashing Red: Why Europe and Asia are Tumbling - The Economist
A Capitulation That Precedes a Turnaround? - Tom Stevenson, Telegraph
Disturbing Parallels to 1987, but Hope Too - Mark Hulbert, Marketwatch
Don't Jump Yet, Meltdowns End Quickly - Terence Corcoran, National Post
Down Markets Beg for Market-Friendly Candidates - Editorial, NY Sun
If Everyone's Finger-Pointing, Who's to Blame? - V. Bajaj, NY Times
The Challenge of Sovereign Wealth Funds - Philipp Hildebrand, VoxEU
Investors See a Half-Empty Glass - Paul Maidment, Forbes
Thoughts on Falling World Markets - Michael Sesit, Bloomberg
Bloody Monday in overseas markets

Global Market Sell Off
It's a Mess Out There

Credit Ripples are going everywhere.

Infectious Greed:
Monolines, Disney, and the Trouble with Arsenal Football -- Anyway, building on Friday's Fitch downgrade of bond monoline insurer Ambac, ratings service Fitch (which itself really needs a good downgrade upside the head) today downgraded some of the bonds insured by Ambac. In particular, it downgraded debt that Arsenal Football Club had issued to build its Emirates stadium in London.

What implications might that have? Among other things, if any more debt were to be required it could cause Arsenal ticket/pass prices to go up, as that debt has to be serviced at a higher cost, which has to come from somewhere, most obvious among which is Arsenal fans. More money from Arsenal fans means less money for said consumers to spend on other things, of course, which is yet another fine example of the many merry ways that credit problems bounce Brownian-style back-and-forth from market to market.

Infectious Greed:
Bank of China: Subprime Writedowns 6x Forecast

Saturday, January 19, 2008

Laughing all the way to the Poor House

Stock Market giving up the ghost?
Infectious Greed:
Colbert Report: Bizarre Interview with Lou Dobbs -- This has to rank up there as one of the strangest moments in recent television history. We have Comedy Central's Stephen Colbert, playing off-kilter right-wing talkshow host "Stephen Colbert", who in turn is playing Esteban, himself some sort of Colbert-created Mexican talkshow show, interviewing CNN host Lou "Stronger U.S. Borders" Dobbs on-set behind faux fences and barbed wire -- plus "chickas". [...]

Kaptur’s ‘separated at birth’ moment -- [Democratic Budget Committee member Marcy Kaptur confuses Fed. Chairman Chair Ben Bernanke with Secretary of the Treasury Hank Paulson. Kaptur's gaffe has already been included on her Wikipedia bio.]
Kaptur was making her way through a four-part question driving at the culpability of Wall Street financiers in the sub-prime crisis when she zeroed in on the Fed chairman, “Seeing how you were the former CEO of Goldman Sachs —”

A roar erupted on the dais as members from both sides of the aisle tried to correct her at once. The audience gasped.

Not deciphering what they were saying, the 13-term congresswoman and former staffer in the Carter White House pressed on: “I got the wrong firm?”

“No, you’re confusing me with the Treasury secretary,” said Bernanke, a longtime academic whose very lack of private-sector experience stirred worries while he was a contender for the Fed job.


“Yes,” said Bernanke.

“Oh, OK. Where were you, sir?” Kaptur said, clinging to the idea that he had been a Wall Street titan.

“I was a CEO of the Princeton economics department,” Bernanke quipped, prompting laughter.

Kaptur apologized, admitting, “I got you confused with the other one.”

US economy teetering?

Raquel Welch: Space-Girl Dance