Housing Bubble Bursting?

[Randolph Kinney]

Alt-A bank shares nailed on anticipation of more losses

http://www.marketwatch.com/news/story/mt-slides-mortgage-woes-first/story.aspx?guid=%7BEB5A4602%2D15FC%2D443B%2D98E7%2D9A1508F65D59%7D

NEW YORK (MarketWatch) - M&T Bancorp shares fell nearly 9% Monday after analysts downgraded the bank in anticipation of lower results due to subprime mortgage losses, casting a pall over financial stocks in early trading.


"Management of M&T believes that the value of the Alt-A residential mortgage loans it holds is greater than the amount implied by the few bidders presently active in the market," the bank said.


Analysts at A.G. Edwards and Banc of America Securities lowered their ratings.

 

[Randolph Kinney]

Alt-A Beyond Subprime, Continued

http://blogs.marketwatch.com/greenberg/2007/04/beyond_subprime.html

How bad will it get? Is the worst over? Follow the bouncing ball:


1. Last Thursday IndyMac's (NDE) CEO Michael Perry said, "Alt-A is not 'slightly' less risky than subprime, it is a lot less risk."


2. Then, on Friday, after the close, M&T Bank (MTB) issued a news release saying that because of "unfavorable market conditions," it's having trouble selling Alt-A loans. It also said auction pricing "was lower than expected." More troubling: M&T said it was forced to take a loss on laons it had sold into the market but was being forced to repurchase because of early payment defaults by borrowers.

3. Also on Friday, National City (NCC), a big Alt-A second mortage lender, sent a letter to mortgage brokers saying that as "dramatic changes in the subprime market are having a ripple effect on Alt-A and prime lenders...investor appetite for stated income, lower FICO and/or high CLTV originations is evaporating quickly." As a result, the bank is getting rid of a month-old loan program that had been expanded to offer three years low interest over 30 years from two years over 28 years.


4. Other alt-A companies to watch include BankUnited (bkuna), whose Alt-A option arms are largely tied to the Florida home market. JP Morgan defended the company today, saying it didn't believe BankUnited faces the same risk as M&T. Then again, a few weeks ago Citicorp. upgrated M&T.


The beat goes on...

 

[Greg Bell]

Jobs avaliable at Mc Donalds...



AP
New Century Seeks Chapter 11 Protection
Monday April 2, 1:31 pm ET
By Gary Gentile, AP Business Writer
Subprime Lender New Century Files for Bankruptcy, Fires 3,200


LOS ANGELES (AP) -- Subprime mortgage lender New Century Financial Corp. filed Monday for Chapter 11 bankruptcy protection and said it intends to fire 3,200 workers -- 54 percent of its work force -- and sell the company's major assets.
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Once the second-largest provider of subprime mortgages in the U.S. based on loan volume, the company said the firings would better position the company for a possible sale.

President and chief executive Brad A. Morrice said in a statement that New Century made the move after exploring a variety of ways that would have enabled it to continue its operations.

"The Chapter 11 process provides the best means for selling our servicing and loan origination operations to financially sound parties," he said. "It is our hope that potential buyers will be in a stronger position than we are to employ many of our associates on an ongoing basis."

New Century was the latest lender to fall on hard times amid a spike in mortgage defaults caused by borrowers unable to make payments. Subprime lenders provide financing to people with shaky credit histories.

More than two dozen subprime lenders have shut down in recent months and others are scrambling to stay in business.

New Century said it had agreed to sell its loan servicing business to Carrington Capital Management LLC and its affiliate for about $139 million, subject to the approval of the bankruptcy court.

CIT Group and Greenwich Capital Financial Products Inc. have agreed to provide up to $150 million in working capital to facilitate the reorganization process, the company said.

New Century has also agreed to sell certain loans and residual interest in some trusts to Greenwich Capital for $50 million.

New Century, based in Irvine, filed the bankruptcy action in U.S. Bankruptcy Court for the District of Delaware. The move had been expected for several weeks.

"This was a very hard step for me personally and clearly not the outcome I would have preferred," Morrice said.

Last week, New Century said several of its lenders planned to sell their outstanding mortgage loans and use the proceeds to offset payment obligations by the company, while retaining the right to recover the difference.

The company has signed consent agreements with several states and received cease-and-desist orders from others in recent weeks.

The state agreements are intended to keep New Century from accepting new mortgage applications on grounds that it has violated state laws, including failing to fund mortgage loans after closing.

Like other subprime lenders, New Century profited during the real estate boom, when appreciation rates soared and equity protected most homebuyers from defaulting on their loans. Most could simply refinance or sell homes at a big enough profit to pay off mortgages and move on.

Investment banks also jumped in, eager to buy loans from subprime lenders then slice them up into bond products to sell on Wall Street.

That helped New Century stock hit its historic high of $65.95 in December 2004. Its loan production for 2005 hit a record $56.1 billion.

On Feb. 7, New Century informed the Securities and Exchange Commission that it would have to restate financial results for the first three quarters of 2006. The problem: The company had failed to accurately tally losses from loan repurchases.

It also faces federal probes by the SEC and the U.S. Justice Department. And shareholders, angry over their losses and alleging mismanagement by the company's directors and officers, have fired off several lawsuits.

 

[Randolph Kinney]

Alt-A Lender SouthStar Funding Ceased

http://www.southstar.com/

SouthStar Funding, LLC sincerely regrets that it was necessary to cease its mortgage lending operations. The recent unprecedented downturn and policy changes in the mortgage industry necessitated this action. SouthStar appreciates its employees' and customers' loyalty to the company throughout the years.

 

[Terrel L. Shields]

Jobs avaliable at Mc Donalds...

Sorry, all our MB's have master's degrees.

unprecedented downturn and policy changes in the mortgage industry necessitated this action

It is unprecedented because at no time in the history of our country has so much subprime lending went on with nary a check on the paperwork...to see if anything the borrower said was true, if the appraisal made sense, if the application was not fraudulently prepared by a broker.....

And begs the question...if it is unprecedented, how is it not a 'bubble'?

 

[Randolph Kinney]

Alt-A mortgage warning sparks industry selloff

http://www.marketwatch.com/news/story/mt-banks-alt-mortgage-warning-sparks/story.aspx?guid=%7B9D456B9D%2D726B%2D4C54%2D9A8C%2D5767E899B7E1%7D

NEW YORK (MarketWatch) -- A big regional bank's disclosure that it is seeing a surprisingly sharp rise in mortgage defaults sparked an industrywide selloff of bank stocks Monday.


"We would not be surprised to see similar-type pre-announcements from other banks heading into earnings season," said Joseph Fenech, an analyst at Sandler O'Neill & Partners. He noted that the Alt-A market encompasses borrowers with better credit scores than the typical clientele of the subprime lenders that in recent months have been struggling to stay afloat.

Analysts pointed to Regions Financial Corp., Sovereign Bancorp Inc. and National City Corp. as possible candidates for problems stemming from their sizable Alt-A portfolios.

All three banks already have been grappling with mortgage-related problems.

Philadelphia-based Sovereign is struggling to unload part of its portfolio of home-equity loans, due to insufficient demand for the loans in the secondary market.

 

[moh malekpour]

What happened to "Quid Pro Quo?"

http://www.cnbc.com/id/17910178

Countrywide CEO: Regulators Should Let Mortgage Market "Self-Correct"

The public cannot and should not sacrifice more for the chartered banks to correct themselves. Enough is enough.
The countrywide CEO is asking the FED and the public to leave them alone and let them to correct themselves. That is too much to ask the public to sacrifice their money for chartered banks reckless lending. Chartered lenders have already had the advantage of public protection such as FDIC protection and access to public funds such as Fed Reserve depository. This advantage was supposed to be a “Quid Pro Quo” meaning they get the taxpayers protection and access to taxpayers fund in exchange to be exposed to the Fed regulatory laws. They sure took advantage of taxpayers generosity but they didn’t comply with the lending sound and safe laws because the Fed regulatory laws were not implemented and Because they were certain that the taxpayers FDIC would protect them and bail them out if they go down and they had access to low rate Fed Reserve Depository to borrow low and lend high and no regulators were watching them. Almost all of chartered bankers engaged in some risky lending activities by not checking the borrowers income, credit, property value and a sound and safe underwriting and even GSI's bought some of those bogus loans from risky sub prime lenders with public protecd funds. Chartered lenders didn’t fully implement the FIRREA and CRA laws and they didn’t comply with lending laws in some of their loans. Where in the FIRREA says that chartered lenders should engage in risky loans such as sub prime or Alt-A, option arms, stated income, liars loan, no income verifications, no credits, interest only, negative amortization loans with public protected funds? The Fed failed its share in that “quid pro quo” to watch them and enforce their regulatory laws and now is the time to do it. Leaving the chartered lenders in status quo and hoping that they are going to correct themselves is like letting the fox to guard the henhouse.
So far, all media noises have been about sub-prime non bank lenders because they engaged in a very risky business and they are going to pay for their mistakes as they deserve but they didn’t have the public protection and access to the public funds that chartered banks had and for that reason, they didn’t have a regulatory laws to supervise them. Most of them are down and vanishing from the market and the Fed should help their victims to recover from them but not bailing them out. The public is already sacrificing in bailing out the chartered banks if they go down but cannot protect the non bank lenders. If they failed their borrowers, the Fed can use the predatory law and protect the public from them by suing them.
I know that someone is going to jump on me that I don’t know anything about mortgage business but it is no secret the chartered banks have gotten a free ride in past few years by using the public protected funds and access to the public fund but not being supervised and watched by the FED regultors on their so called innovative loans which are mostly short cut and non compliance with the lending laws.

 

[JSmith43]

The countrywide CEO is asking the FED and the public to leave them alone and let them to correct themselves.

Where were you in 1988-89?

 

[moh malekpour]

Where were you in 1988-89?

You need to elaborate more of what do you mean and be more specific. It seems that you try to remind me of 1988-1989 FIRREA encatment. If so, are you telling me that the FIRREA gave the regulated lenders a free hand to engage in risky loans or you are talking about the deregulation act? but the deregulation act, Gran-st-germain act and truth in lending act were enacted in 1980

 

[JSmith43]

You need to elaborate more of what do you mean and be more specific. It seems that you try to remind me of 1988-1989 FIRREA encatment. If so, are you telling me that the FIRREA gave the regulated lenders a free hand to engage in risky loans or you are talking about the deregulation act? but the deregulation act, Gran-st-germain act and truth in lending act were enacted in 1980

The investors, in the late '80's were kicking *** and taking names. Never was it harder to get and stay on an approved list. By the time politicians rode in on their white horses to save the day, the mess was already being cleaned up quite nicely.

The licensing act gave the investors evidence of state sanctioned due diligence on every copy of an appraiser's license....and later, E & O. They backed off big time on their qualifications checking initiatives, a couple years into licensing. Lender select was a natural evolution for FHA. After all, the appraisers were "state sponsored", so to speak.

That's about all The CW guy is right, but the odds are that history will repeat itself. Maybe the D's can prove me wrong.