US mortgage carnage

[dhukka]

How low can US Housing go?

NEW RESIDENTIAL SALES IN NOVEMBER 2007
Sales of new one-family houses in November 2007 were at a seasonally adjusted annual rate of 647,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 9.0 percent ( ±13.9%)* below the revised October rate of 711,000 and is 34.4 percent ( ±7.9%) below the November 2006 estimate of 987,000.

The median sales price of new houses sold in November 2007 was $239,100; the average sales price was $293,300. The seasonally adjusted estimate of new houses for sale at the end of November was 505,000. This represents a supply of 9.3 months at the current sales rate.

 

[ithatheekret]

Hey the woods have only been enter though .............

Those CDO's we keep hearing about are the ones linked to mortgages , they've got near the tree line and stepped on the first mine . As the widening of the tier structure in the " plan " eventually widens , which should be pretty quick if the average mortgage payer decides to stop paying utilities and gets the FICO score down enough for entry .

Then there's the "other " batch of CDO's that are made up of the fantastic plastic debts . Even here at home you can guarantee your high end credit card debt is held with a batch of others in a CDO .

So far , I have been able to account for $1.3 Trillion USD in total CDO debt related to both above mentioned . The reported figures or administrative data ( spin ) is well under that .

Credit card CDOs are not merely going to explode , they are going to disintergrate .

With the 07 list of writedowns coming to an end , it's the 08 continuation of the downhill run , which will really shock onlookers .

The list has just about every big name on it , this means they will be looking for alternate revenues to bolster the ledgers , we can forget the share markets , they won't offer anything close to what is needed .

So what will they all be looking at or start getting into ?

FOREX is my bet .

This is a $3 Trillion market and it will grow larger now as it is the new ( to them ) area , where money flows are attractive enough to spend billions getting into it .

The move looks obvious to me , so much so I'd say a blind dog on crutches could see it a mile off .

 

[ithatheekret]

PS... I don't see any Central Bank or President in a rush to save ARM option mortgage owners , the move looks more inclined to be supportive of land price as a matter of policy , the credibility of the loans themselves aren't actually being addressed , a little yell afar about fraud and yada yada ....

May sound like quiet little words to many , but it's more probable that it is many that it will effect , totally indiscriminate , rich or poor , happy or unhappy .

ARM options allowed those who chose them to make lower payments with an option to pay the debt off quicker . This is where the mansion crisis became a creation , even some smart money ..... cough cough cough has bitten too deep on the apple here .

They are already having to make the higher repayments they didn't foresee , the average of these may critically be defined as 2 to 3 carders . This being allowed in my view , basically from their credit scores , which bloated the eyes beyond the ability of vision enough for them to take a high risk chance they really couldn't afford to take in the first place .
I'm not talking about the Mr and Mrs Average either , the structure of option ARM aims it fair square at Mr and Mrs Above Average , who will either have to make good on any equity built into the loan that will obviously be lost or go bust . If they go bust they may as well take the 2 to 3 cards with 'em as a logical choice for disposure .

The funny thing is this ......... they can't stick them all in gaol , it's an awfully long conspiracy list right down to the appraisal

If they did , with the combined acreage they might be able to make half a percent of what they need to make ethanol .

 

[Uncle Festivus]

There appears to be a lot of companies reporting these days with "first time ever" losses. No end to the contagion as yet! Mortgage insurers next to feel the effects of the credit/risk aversion squeeze.

Dec. 31 (Bloomberg) -- Defaults on privately insured U.S. mortgages rose 35 percent in November to a record, an industry report today showed, adding to evidence the U.S. housing slump is deepening.

The number of insured borrowers falling more than 60 days late on payments jumped to 61,033 last month from 45,325 in November 2006, according to data from members of the Washington- based Mortgage Insurance Companies of America. The missed payments, often a prelude to foreclosure, represented a 2.9 percent increase from October.

``This is another data point that suggests that the mortgage insurers are in for a tough slog for 2008,'' said David Havens, a credit analyst at UBS AG in Stamford, Connecticut. ``Continued deterioration is likely to spur higher claims. And higher claims activity may result in some companies needing to raise money.''

Home prices fell 6.1 percent in 20 U.S. metropolitan areas in October, according to S&P/Case-Shiller. Mortgage insurance compensates lenders for losses on bad loans as falling home prices make it harder for borrowers to refinance.

MGIC Investment Corp., the largest U.S. mortgage insurer, and No. 2 PMI Group Inc. reported losses in the July-through- September period, their first unprofitable quarter as public companies.

 

[websman]

I'm glad I don't have a mortgage....

 

[ithatheekret]

These are the charts for Merrill Lynch and Citi Group

Merrill has $10B in write downs , Citi around $22B

This may make Merrills look a tad better to some , but they're just figures and charts . I reckon the $10B will hurt Merrill more than the $22B will hurt Citi .

I can't wait to hear the gist of the spin they drag out now .

 

[Wysiwyg]

Merrill has $10B in write downs , Citi around $22B

It would appear we have more problems on the horizon, more news articles of concern, credit cards paying more than 20% interest with rises to come ............

House equity maxed out, now Americans are being forced to max out Credit cards to cover the shortfall.

My biggest concern, is how central banks have gone from facilitating a market, to creating a false market by pumping in heaps of liquidity, rather than letting a recession take place. ASX.G touched on it in another thread, that recession is seen as 'natural' in parts of Europe.

The money hasn`t disappeared, so where has the money pooled/settled and what or who is holding it? Any ideas anyone?

 

[numbercruncher]

The money hasn`t disappeared, so where has the money pooled/settled and what or who is holding it? Any ideas anyone?

Sovereign Wealth funds of places like China, ME, Russia absolutely creaming it.

Hundreds of other entitys and Individuals joining club Billionaire throughout this crack up boom as well

Quite a funny situation really, Millions of people buy 100k houses for 200k while earning $5 an hour, all the excess gets blown on consumerism and bridging the gap between earnings and spendings, and now the partys over everyone is left scratching their heads confused about how to pay the bills and those left holding the Green stuff watch it evaporate on a daily basis, kinda like magic really

 

[numbercruncher]

Some may suggest its a multi Generational plan by the Illuminati coming into fruition ..... Ive read stranger things

For many years the words international banker, Rothschild, Money and Gold have held a mystical type of fascination for many people around the world but particularly in the United States.

Over the years in the United States, the international bankers have come in for a great deal of criticism by a wide variety of individuals who have held high offices of public trust -- men whose opinions are worthy of note and whose responsibilities placed them in positions where they knew what was going on behind the scenes in politics and high finance.

President Andrew Jackson, the only one of our presidents whose administration totally abolished the National Debt, condemned the international bankers as a "den of vipers" which he was determined to "rout out" of the fabric of American life. Jackson claimed that if only the American people understood how these vipers operated on the American scene "there would a revolution before morning."

Congressman Louis T. McFadden who, for more than ten years, served as chairman of the Banking and Currency Committee, stated that the international bankers are a "dark crew of financial pirates who would cut a man's throat to get a dollar out of his pocket... They prey upon the people of these United States."

John F. Hylan, then mayor of New York, said in 1911 that "the real menace of our republic is the invisible government which, like a giant octopus, sprawls its slimy length over our city, state and nation. At the head is a small group of banking houses, generally referred to as 'international bankers.'"

Were these leading public figures correct in their assessment of the situation, or were they the victims of some exotic form of paranoia?

Let's examine history analytically and unemotionally and uncover the facts. The truth, as it unfolds, will prove to be eye-opening and educational to those who are seeking to more clearly understand the mind-boggling events that have been (and are) taking place on the national and international scenes.

http://www.biblebelievers.org.au/slavery.htm

 

[theasxgorilla]

The money hasn`t disappeared, so where has the money pooled/settled and what or who is holding it? Any ideas anyone?

ABSOLUTELY!

It's called Debt to Equity. When you are putting the deals together as an insider at all manner of levels ie. from the mortgage brokers to the CDO deal-makers there are fees and commissions being charged. Debt is sold and the people who sell it are remunerated. The person at the end of the chain is the one left servicing the debt. The people who sold the debt along the chain and took their fees and commissions and secured their capital gains have built equity. Whether they used that equity to good effect regarding their own debt to equity ratios or whether they got caught up in the euphoria and went on to leverage themselves to the hilt is an individual and unknown factor. Those participants who were prudent are probably sitting pretty now with both increased equity, manageable debt, and low repayments locked in at low interest rates.

ASX.G

BTW, if the public TV meltdown by Kramer is anything to go by I'd suggest that a decent amount of the 'fat cats' involved were not prudent. Or they're just being greedy for greed's sake. It's always difficult to tell if they're squealing because they're really bleeding or whether if feels like they're hurt because they're not getting a free lunch anymore.

 

[Wysiwyg]

ABSOLUTELY!

The person at the end of the chain is the one left servicing the debt. The people who sold the debt along the chain and took their fees and commissions and secured their capital gains have built equity.

Thanx asx.g ....

The crisis began with the bursting of the housing bubble in the U.S. and high default rates on "subprime", adjustable rate, "Alt-A", and other mortgage loans made to higher-risk borrowers with lower income or lesser credit history than "prime" borrowers.

I don`t have any formal training in economics.

 

[refined silver]

Thanx asx.g ....

I don`t have any formal training in economics.

Maybe this will help explain it all. (I posted it on the gold thread too, but is relevant here too.)

Constant Obligation Leveraged Originated Structured Oscillating Money
Bridged Asset Guarantees

Investment Dealers are excited to announce the newest structured
finance product - Constant Obligation Leveraged Originated Structured
Oscillating Money Bridged Asset Guarantees, or COLOSTOMY BAGS. Designed to accommodate the most sophisticated investment strategies, Colostomy Bags contain the equity tranches of Structured High Interest Taxable Derivatives, or ****, and are leveraged an infinite amount of times through the innovative use of derivatives.

"Its an actively managed, unlimited liability, open ended investment
with no maturity date, which pays LIBOR plus 5,000 and has no correlation to
traditional investments" said a spokesman for the Investment Dealer who
engineered the product. "It's based on a CDO structure, but it's
designed to default BEFORE the first coupon payment, which you'll agree has no correlation with stodgy traditional investments and is a perfect fit for
portable alpha scams, er, strategies." Following the default, each month
more leverage is added to the structure to pay for the coupon and the
Dealer's fees which are set at 80%. "We feel the fees are reasonable,
given the adrenaline rush you'll get each month attempting to mark these."

The Colostomy Bags carry a AAAA rating, based on the rating agencies
opinion that they are even safer than Treasuries. "You can't use
traditional credit analysis to value these babies, no sir-ree" said a spokesman for a rating agency. "Just like Icelandic Banks, we give them the highest
rating because you just know that the Fed will bail out all the hedgies who buy these things..remember like Long Term Capital? And the best part is, the
beauty of this structure is that the loss given default is NEGATIVE, so
by extension we feel that the CDS will trade through Treasuries."

Inhaling deeply on a fatty, he continued "We've been tinkering with
our model, which served us well for Enron and the Telecoms in '02, and our
stress testing shows that the probability of loss in the senior tranche
is close to zero." The model, constructed of a wishing well, Joseph Jett's
trading blotter, and drawings of Unicorns then collapsed in a heap.
"Well, back to the drawing board!" he cackled.

A real money investor, huddled on the windowsill outside his office,
said he remained optimistic about holding the Colostomy Bags but was a bit
concerned with the 95% decline in value on the first day they traded.
"We've taken a bit of a haircut on these but I'm waiting to see the first
servicer report, which should arrive in a few months. At first I was annoyed that the dealer who sold them to me refused to make a market in them, but that makes my job easier since I'm not tempted to sell."

We located a hedge fund manager at a due diligence meeting in the VIP
room at Score's. He said he was skeptical of the structure at first but was
dared into buying it by a fixed income salesman. "He said to me, 'what's wrong
with you, its quadruple A rated, just buy it, what are you a pussy?' He
also said it was going into 'an index', although he didn't say which one, but
I felt that I had to buy it. And that was good enough for me, bro'."

I have no idea who is the author, but its certainly making the rounds!

http://bigpicture.typepad.com/commen...nt-obliga.html

 

[finnsk]

Another one from USA now even prime housing loans is starting to get into problems because people has borrowed against their equity.
http://www.businessweek.com/magazine/content/08_04/b4068000575390.htm

On Jan. 16, JPMorgan announced it set aside an additional $395 million for troubled home-equity products in the last quarter, compared with just $125 million for subprime mortgages. Washington Mutual reported in the latest period that its bad home-equity loans and lines of credit surged by 130% from the end of 2006, forcing the bank to up losses by $967 million. Even lenders of a conservative bent, those that managed to sidestep much of the subprime mess, are getting hammered: Wells Fargo (WFC) took a recent $1.4 billion writedown, largely from home-equity lending.

 

[dhukka]

How was WaMu's 4th Quarter? First quarterly loss since 1997. Non-performing assets ratio rose from 0.8% to 2.17% (it's not just subprime and Alt-A on the rise either) . Loan loss reserves have skyrocketed as shown below. The are expecting loan loss reserves to increase to between $1.8 - $2.0 billion in 1Q08. Nasty stuff.

 

[Gundini]

Maybe this will help explain it all. (I posted it on the gold thread too, but is relevant here too.)

Constant Obligation Leveraged Originated Structured Oscillating Money
Bridged Asset Guarantees


http://bigpicture.typepad.com/commen...nt-obliga.html

That is absolute GOLD!
Roflmao....

The link doesn't seem to work though, but this one does: http://bigpicture.typepad.com

How funny are these guys... Thanks for the link...

 

[ithatheekret]

AAA reratings ???????

Bond-insurer woes may trigger more write-downs
Doubts on AAA ratings for Ambac, MBIA spark turmoil in muni bond market


By Alistair Barr, MarketWatch
Last update: 6:08 p.m. EST Jan. 18, 2008

SAN FRANCISCO (MarketWatch) -- Just when you thought it was over, trouble in the $2.3 trillion bond-insurance business could trigger another wave of big write-downs from banks and brokerage firms, experts said Friday.


'The destruction of the bond insurers would likely bring write-downs at major banks and financial institutions that would put current write-downs to shame.'
”” Tamara Kravec, Banc of America Securities


http://www.marketwatch.com/news/sto...-FB70-4304-B6B4-C444A554401C}&dist=TNMostRead

 

[reece55]

Bond-insurer woes may trigger more write-downs
Doubts on AAA ratings for Ambac, MBIA spark turmoil in muni bond market


By Alistair Barr, MarketWatch
Last update: 6:08 p.m. EST Jan. 18, 2008

SAN FRANCISCO (MarketWatch) -- Just when you thought it was over, trouble in the $2.3 trillion bond-insurance business could trigger another wave of big write-downs from banks and brokerage firms, experts said Friday.


'The destruction of the bond insurers would likely bring write-downs at major banks and financial institutions that would put current write-downs to shame.'
”” Tamara Kravec, Banc of America Securities


http://www.marketwatch.com/news/sto...-FB70-4304-B6B4-C444A554401C}&dist=TNMostRead

I think the Fed should be watching this film clip.....

http://www.cnbc.com/id/15840232?video=625421280&play=1

For once in his life, Cramer has an incredibly smart proposal to clean up the mess - instead of a 150 Bil tax cut plan that will result in increased retail sales and further fuel inflation, remove the bond insurers....... Seems pretty logical to me, any views here?????

Cheers

 

[ithatheekret]

Hmmm.... perhaps an ASF fan , are we winning him over , the perma bull has turned , yeeehaaa , we must at least be getting close to a bottom or something else really baaaad is coming .

Now tell him to go lobby Hilary to open a new handcuff manufacturer to employ thousands of Americans . I think there should be bounties for Wall Street and underWall Street members still free . We've got nothing to cheer about either . Stuff the waste sites , build a massive gaol instead ......... somewhere around Woomera

 

[dhukka]

I think the Fed should be watching this film clip.....

http://www.cnbc.com/id/15840232?video=625421280&play=1

For once in his life, Cramer has an incredibly smart proposal to clean up the mess - instead of a 150 Bil tax cut plan that will result in increased retail sales and further fuel inflation, remove the bond insurers....... Seems pretty logical to me, any views here?????

Cheers

Cramer makes it sound simple and effective however I think it raises a number of issues. Firstly I think it's comparing apples to oranges by comparing the S&L /RTC bailout to today's mess. RTC was a depositors bailout but that's probably not the most important point.

It raises this whole idea of moral hazard, that these institutions are too big to fail. I find it amusing that these so-called free market capitalists want government intervention at the drop of a hat every-time something goes wrong.

But I have to confess my opinion is largely influenced by what I want to see happen. I actually want them to fail, and I want to see reverberations throughout the economy as a result. I want to see widespread panic and plunging stockmarkets. I also want to see institutions that employed floored business models punished for their greed and incompetence.

 

[Judd]

Just to note that Berkshire Hathaway, Mr Buffet's little plaything, has entered the bond insurers market. Suppose he has done it just to lose some of that cash

http://www.usatoday.com/money/industries/insurance/2007-12-28-berkshire-insurance_N.htm