Housing Bubble Bursting?

[JSmith43]

Who pays the servicing fee to the owner of the servicing right if it is not coming out of the monthly payment?

The way I understand it, if the loan was sold to Freddie (for example), Freddie would be on the hook for the servicing fee for as long as the loan needed to be serviced. Anyone out there, please correct me, if I am wrong. Most of this stuff, I have learned via BS sessions, so sourcing could be a problem

 

[Randolph Kinney]

FDIC: Subprime loans can't be easily rewritten

http://www.marketwatch.com/News/Story/Story.aspx?guid={D35B39A1-8BCA-4D6C-8226-39B5A118A631}&siteid=mktw&dist=nbk

WASHINGTON (MarketWatch) -- Subprime borrowers threatened with foreclosure because of big increases in their monthly payments won't find it easy to get relief from their lenders, even if the lenders are willing, a top banking regulator said Tuesday.


Refinancing into a more affordable loan may be the best option for those who can, said Sheila Bair, chairman of the Federal Deposit Insurance Corp.

"We are on the precipice of a mortgage tsunami of foreclosures unless immediate intervention occurs," said David Berenbaum of the National Community Reinvestment Coalition. More than 14% of subprime loans were delinquent at the end of 2006.


One million subprime borrowers face large payment resets this year, and another 800,000 will next year, FDIC has said.


Most of the adjustable-rate mortgages taken out in the past few years can't be easily rewritten, Bair said. About three-fourths of the $600 billion in subprime ARMs taken out in 2006 have been securitized, or sold in the secondary market, which means that neither the servicer of the loan nor the original lender can easily negotiate with the borrower to change the terms of the loan, she testified.

Reworking the terms of the loan after it's been securitized "can be very difficult and may require extraordinary actions," Bair said.


"Once the lender has sold the mortgage to the issuer, the lender no longer has the power to restructure the loan or make other accommodations for its borrower," Bair said.

 

[Randolph Kinney]

Is Liquidity--or Inflation--Driving Dow to Record Territory?

http://www.cnbc.com/id/18153705/site/14081545

Ned Riley, chief executive officer of Riley Asset Management, told CNBC’s “Morning Call” that the Dow Jones Industrial Average will soon top 13,000 and 14,000 is possible.

He said liquidity is driving the market higher and propelling intense merger and acquisition activity.

“It’s liquidity, liquidity and more liquidity,” Riley said Tuesday. “The tremendous amount of liquidity is pushing the market higher.”

But Peter Schiff, president of Euro Pacific Capital, disagreed.

“It’s not liquidity – it’s inflation,” Schiff said. “The new (market) high is meaningless. It’s an illusion created by inflation. Look what’s happening to the value of the dollar – it’s near a 27-year low against the British pound, it’s at an 18-year low against the Australian dollar.”


He said European stocks are now more valuable than U.S. stocks for the first time since the years prior to World War I.

 

[Terrel L. Shields]

It’s an illusion created by inflation. Look what’s happening to the value of the dollar – it’s near a 27-year low against the British pound, it’s at an 18-year low against the Australian dollar.”

Sounds more sensible. Cheap money in the end will not be a blessing.

 

[Randolph Kinney]

LA Times: California foreclosures near record levels

http://www.latimes.com/classified/realestate/news/la-fi-forclose17apr17,0,5392708.story?coll=la-class-realestate-news


Now couple this article and graphic with C.A.R. graphic for 4Q 2006 and it is plain to see that California is in trouble. Foreclosures are going out of control and they will threaten the health of the housing industry as a whole in this state.

 

[JSmith43]

Sounds more sensible. Cheap money in the end will not be a blessing.

Another take on this issue: Can you think of very many things made in Europe that you think are a good deal compared to American, Japanese, Korean or Chinese options? Hyundai is starting to make some really good cars Other than an Italian vacation or taking my wife to Paris (recent request), I can't think of anything much that excites me and is legal/moral, denominated in Euros.

From the point of view of investors, who the heck would put their money in Europe, except that they are on the verge of stepping up interest rates again? I believe it is primarily the interest rates that attract investment and prop up the Euro. It may be also temporarily propped up from the shift in oil valued in Euro instead of dollars as well. I haven't read up on that one beyond headlines a while back.

 

[Greg Bell]

The stock market is one giant Enron.So many fools following the cooked government data.Housing starts were up 7% , gimme a break .Anyone building in this market needs to get what they are going to get , broke.......

 

[Randolph Kinney]

From the point of view of investors, who the heck would put their money in Europe, except that they are on the verge of stepping up interest rates again? I believe it is primarily the interest rates that attract investment and prop up the Euro.

Interests rates reflect the price of money along with monetary policy. The exchange rates and their movement reflect money flows or demand for a currency or lack thereof.

It may be also temporarily propped up from the shift in oil valued in Euro instead of dollars as well. I haven't read up on that one beyond headlines a while back.

Oil is traded in and settled in dollars. It is not that the price of oil has gone up, it is after all reflecting the value of the dollar, which is going down relative to commodities and other currencies. The exception has been the Yen, but it reflects arbitrage by the traders in interest rate differentials.

I believe the Euro and Pound exchange rate vis-a-vie the dollar is an expression of who do you believe for controlling inflation; the FED or Europe central banks?

Here is the open letter from the Bank of England to the U.K. Treasury:

http://www.marketwatch.com/news/story/text-bank-englands-letter-britains/story.aspx?guid=%7B2676F061%2DCA78%2D44B9%2D9A2B%2D1DAD0BD9AFD8%7D

The CPI inflation rate for March ... is 3.1%. That is more than one percentage point above our target of 2%. Under the terms of the remit you have given us, I am, therefore, writing an open letter to you today, on behalf of the Monetary Policy Committee, to explain why inflation has risen above target and what we propose to do about it.

The 1998 Bank of England Act sets out the objectives of the Monetary Policy Committee. They are to maintain price stability and, subject to that, to support the economic policy of the Government, including its objectives for growth and employment. When you wrote to me on March 21 this year, you confirmed that the remit for the Monetary Policy Committee would remain unchanged and that the price stability objective remained a target for inflation, as measured by the twelve-month increase in the Consumer Price Index, of 2%, which the Committee should seek to meet at all times.

Consequently, if inflation moves away from the target by more than one percentage point in either direction, you have asked me to send you an open letter setting out the reasons why inflation has moved away from the target, the policy action that the Committee is taking to deal with it, the period within which we expect inflation to return to the target, and how this approach meets the Government's monetary policy objectives. As the remit for the Monetary Policy Committee makes clear, the thresholds for writing an open letter do not define a target range. The target is 2% at all times and is not a range. The purpose of the thresholds is to define when inflation should trigger an explanatory letter.

As some of the upside risks to inflation began to materialize last year, the Monetary Policy Committee acted. Since August, it has raised Bank Rate by a total of 75 basis points to 5.25%.

 

[Randolph Kinney]

WaMu quarterly net income falls - subprime kiss of death

http://www.marketwatch.com/News/Story/Story.aspx?guid={FFC80608-1960-4690-9DED-8DF1C30D71A3}&siteid=mktw&dist=nbk

SAN FRANCISCO (MarketWatch) -- Washington Mutual, buffeted by a slowing mortgage market, reported a 20% drop in net income late Tuesday and a $113 million loss for the company's home loans group partly due to subprime exposure.

First-quarter gain on sale included net losses of $164 million on sales of subprime mortgage loans and adjustments to reflect declines in market values of loans held for sale, WaMu said. WaMu decreased the value of its subprime mortgage residual portfolio by $88 million to a balance of $105 million at the end of the first quarter.

WaMu has diverse lending businesses, but it runs a large mortgage operation that originates subprime loans. These types of loans are offered to poorer borrowers with blemished credit records. As interest rates climbed and home prices have stopped rising, delinquencies on subprime mortgages have jumped.

WaMu shares have been particularly hit in recent weeks on concern about so-called Alt-A mortgages. These types of home loans have traditionally been sold to borrowers with solid credit records, but who are in particular situations that prevent them from providing much income documentation.


WaMu was recently listed as the third-largest issuer of Alt-A mortgages in the U.S. and two other companies - American Home Mortgage and M&T Bancorp - warned of trouble with these types of loans in April.

 

[JSmith43]

Oil is traded in and settled in dollars.

I was referring to the change previously announced by Iran.

Here's the gist of it:


http://www.globalresearch.ca/articles/CLA410A.html

In 2005-2006, The Tehran government has a developed a plan to begin competing with New York's NYMEX and London's IPE with respect to international oil trades - using a euro-denominated international oil-trading mechanism. This means that without some form of US intervention, the euro is going to establish a firm foothold in the international oil trade. Given U.S. debt levels and the stated neoconservative project for U.S. global domination, Tehran's objective constitutes an obvious encroachment on U.S. dollar supremacy in the international oil market