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Housing Bubble Bursting?

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Mortgage Bankers and Brokers Trade Barbs

http://www.forbes.com/feeds/ap/2007/05/22/ap3747052.html

The heads of trade groups representing mortgage bankers and brokers traded barbs Tuesday over who's to blame for the housing market's woes.
The head of the mortgage banking industry's trade group claimed brokers profited from a home loan boom but didn't do enough to examine whether borrowers could repay.


Amid increasing evidence of financial distress for homeowners with weak, or subprime, credit histories, John Robbins, chairman of the Mortgage Bankers Association, says he is "mad as hell" at "a few unethical actors" that have sullied his profession's reputation.


"Who made this mess?" Robbins asked. "The short-term folks. People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's all about their commission," he added.


In reaction, the president of the National Association of Mortgage Brokers, e-mailed a statement that said: "It is truly unfortunate (Robbins) has attempted to shift blame away from Wall street, federally chartered banks, state-chartered lenders and underwriters for the subprime situation we find ourselves in today."
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Speed of subprime bust surprises lenders

http://money.cnn.com/2007/05/22/real_estate/subprime_melltdown_yielded_fast_changes/index.htm?postversion=2007052308

Many mortgage lenders expected a subprime meltdown, but not one that came so fast and strong.

NEW YORK (CNNMoney.com) -- The subprime mortgage meltdown has been a shock to industry insiders, but now they say it's hitting harder and faster than expected - even to those who predicted the crisis in the first place.


That was the message Monday from a panel of leading industry executives on the state of the mortgage lending industry at the Mortgage Bankers Association's National Secondary Market Conference & Expo in New York.

Michael Marriott, a panelist and managing director for Credit Suisse, said, "Last October, I predicted the subprime market would collapse and many issuers would go out of business. But the violence and speed of the market sell-off surprised people."


David Lowman, a panelist and chief executive of JPMorgan Chase & Co.'s global mortgage business, said, "35 percent of what once could be done, can no longer be done," referring to mortgage loan products that have effectively been taken off the shelves.


And speaking separately from his Atlanta office, Duane LeGate, president of House Buyer Network, a specialist in short sales and foreclosure prevention, said one of the real estate agents he works with had six deals blow up within four days because, "The loan originator told him, 'We're not offering [these products] anymore.'"


According to LeGate, this kind of thing just started to happen in the past month or so.


Allen Hardester, director of business development for mortgage broker Guaranteed Rate, said many once-common subprime loans products are now almost impossible to find.

"Anything that smacks of no-income and no-documentation is history," he said. "Anything above 85 percent to 90 percent loan-to-value, anything non-owner occupied, anything ludicrous as to value - like someone stepping up from a $1,000 a month payment to a $6,000 a month - is history."


Lenders are also scrutinizing applications much more carefully, and many don't like what they find.

Investors who buy and sell bonds backed by the mortgage payments of ordinary homeowners have seen bad loans rise and have told lenders and brokers they will no longer buy whole classes of securitized mortgages, which can quickly pull the plug on a prospective home buyer.

All the fudging, the lax underwriting, the push for loans that went on during the housing boom were facilitated by the rapid rise of home prices. Outsized increases in home equity in many U.S. housing markets covered a multitude of sins and encouraged lenders to extend loans to poor risk borrowers.

Her home had gone up in value from $200,000 to $300,000 in the interim, and she could tap that extra $100,000 in home equity to pay her bills. If worse came to worse, she could sell her house at a big profit and pay off the entire bill.


But when homes became unaffordable for too many buyers starting in 2006, "The people who were driving up prices couldn't drive them up further," said Hardester.


The speculators, the flippers and rehabbers fled. Houses went on the market and just sat. Inventories lengthened, home builders started pulling back and foreclosures climbed.
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Biggest increase in new home sales in 14 years , wow , another boom on the way.You don't suppose anybody cooked the books just a little.Are new home sales way up in your area???
 
P.S. Toll brother profit down 70% ,New home sales booming , huh???
 
Greg Bell said:
Biggest increase in new home sales in 14 years , wow , another boom on the way.You don't suppose anybody cooked the books just a little.Are new home sales way up in your area???
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http://www.marketwatch.com/news/story/april-new-home-sales-us-unexpectedly/story.aspx?guid=%7B9452748D%2DAA5E%2D4E87%2DA4AB%2D2EDB98C5472F%7D&dist=

WASHINGTON (MarketWatch) - Sales of new U.S. homes unexpectedly surged in April, rising by 16% to a seasonally adjusted annual rate of 981,000, the Commerce Department said Thursday, far exceeding the 865,000 pace expected. Sales were boosted by plunging prices. The median price of a new home was $229,100 in April, down 10.9% in the past year. The inventory of unsold homes fell by 1.5% to 538,000, representing a 6.5-month supply. In March, the inventory was at 8.1 months. Sales in April were down 10.6% compared with April 2006. Sales in the first four months of 2007 were 20% lower than in the first four months of 2006. April sales were led by a 28% gain in the South and an 8.5% gain in the West.
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Would "Sales were boosted by plunging prices." be the answer? Overall, one data point from a month to month comparison does not mean anything, especially when you consider this is an estimate and seasonally adjusted for April.
 
For the "there is no housing bubble" and "home prices never go down" crowd, today's numbers should drive a stake through their hearts.

And to think we're still just getting started. It's a long, long, long, long, long way back down.

However, watch the MSM and NAR spin today's numbers (VS. LAST MONTH) as good news, and that we're "bottoming out". How many times can we "bottom out" until they realize the bottom is not even in sight? And when will they finally think for a change and do year over year comparisons, the only real thing that matters?

Also, keep in mind these numbers from your government are untrustworthy, have a massive margin of error, and don't even include the use of builder incentives, which we know are massive. So take 'em with a grain of salt - even though it's obvious sales are overstated and prices are down much more than reported.

WASHINGTON, May 24 (Reuters) - Sales of new U.S. homes rose 16.2 percent in April, the sharpest climb in 14 years, while prices fell a record 11 percent, according to a government report on Thursday that showed home builders taking extraordinary steps to move houses.

New single-family home sales rose to an annual rate of 981,000 units from a revised rate of 844,000 in March, the Commerce Department said.

Analysts polled by Reuters were expecting April sales to rise slightly to an 860,000 unit pace from a previously reported rate of 858,000 units in March.

In April, the median sales price of a new home fell $28,500 to $229,100 from $257,600 in March. That's the lowest price for a new home since September 2006 when the median sales price was $226,700.

The previous record decline was a 9.4 percent fall-off in September 1981. Compared with a year ago, April's sales price was off 10.9 percent -- the fourth-largest decline ever. The record 14.6 percent decline was set in July 1970 and the next three largest falls occurred in that same year.
 
Hedge fund manager says MBI, Ambac exposed to subprime fallout

http://www.marketwatch.com/News/Story/Story.aspx?guid={43433E52-FB73-4B1A-8349-15B0B1CC05EB}&siteid=nbk

SAN FRANCISCO (MarketWatch) -- MBIA Inc. and Ambac Financial Group are exposed to the fallout in the subprime mortgage sector and that may prove costly for the bond guarantors' policyholders who are probably holding the ultimate risk and could end up with big losses, Bill Ackman, president of hedge fund firm Pershing Square Capital Management, said during a presentation this week.

In a presentation entitled "Who's Holding the Bag?" Pershing's Ackman focused on the shakeout in the subprime mortgage sector and which companies and investors might be hurt most by the trend. MarketWatch obtained a copy of the presentation on Thursday.

That's increased concern that losses will likely hit some of the riskiest parts, or tranches, of subprime mortgage-backed securities, or MBS. Then collateralized debt obligations (CDOs), which invested in some of the lowest-rated subprime MBS tranches, will feel the pain, experts worry.

MBIA and Ambac, which guarantee MBS and CDOs, have significant exposures to subprime mortgages, according to Ackman's presentation.

The hedge fund manager disclosed that he has short positions in MBIA and Ambac shares and also owns credit protection on the companies. Both types of trades can increase in value if the companies struggle and their perceived ability to repay debt declines. Ackman has criticized MBIA in the past.

Ambac has $18.7 billion in subprime exposure through guarantees of MBS or CDOs, according to Ackman's presentation. That's a little over 284% of the company's statutory capital, he noted.

MBIA has $24.7 billion of "high-risk" credit exposure, which includes direct subprime exposure and more indirect exposure through CDOs, Ackman's presentation said. The company's exposure to so-called mezzanine CDOs, with underlying collateral rated BBB or lower, was $5 billion at the end of 2006, which is 73.5% of its statutory capital, he added.


The customers of Ambac and MBIA believe they have transferred credit risk to highly-rated guarantors. But when subprime mortgage losses hit, these guarantees "will have no value" and the policyholders will be "left holding the bag," Ackman's presentation concluded.
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Both the news that housing prices went down and sales when up should be taken with a grain of salt. The news showed that the margin of error on the estimate was 13± percent. In interviews with a building trade group representative, he stated that builders sentiments were negative and there was evidence the 16% increase was not real. We need to wait for the adjustment number. I also suggest that the price is falling because the large homes are not being built and as they leave the market, the smaller homes selling for less are bringing down the average. It would be an interesting study to see what price per SF is doing.

Locally, my Mortgage originator at Arvest said, "May is dead."
 
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