Housing Bubble Bursting?

[Austin]

From AI News Online:
This no the beginning of the end, this is the end of the beginning. This thing is going to be around for longer than most of you residential people unless you have a rich uncle.

Moody’s: Delinquencies Should Peak Mid-2008; Fed Estimates $100 Billion Subprime Loss
The credit quality of U.S. mortgages is set to weaken substantially through the remainder of 2007 and well into next year, with delinquencies peaking in mid-2008, according to Moody’s Economy.com. Delinquencies will peak at 3.6 percent of all mortgage debt outstanding in the summer of 2008, up from 2.9 percent in this year’s first quarter, according to the study by the consulting firm based in West Chester, Pa.

“This will result in substantial financial damage,” Mark Zandi, chief economist of Moody’s Economy.com, said during a teleconference after the release of the study.

Moody’s Economy.com said the subprime adjustable-rate mortgage, or ARM, segment will be the hardest hit, with the rate of mortages in foreclosure forecast to hit 10 percent by mid-2008, up from the current 4 percent. The previous peak of 6 percent was reached soon after the September 11, 2001, terrorist attacks, after which the rate fell to a low of 2.5 percent in the summer of 2005.

Subprime, “Alt-A”, jumbo interest-only and option adjustable-rate mortgages, or ARMs, account for about 25 percent of all mortgage debt outstanding, or around $2.5 trillion. Of that amount, approximately $1.4 trillion is at serious risk of default, he said. Of those mortgages, about $460 billion should actually end up defaulting some time this year or in 2008 and of that, $113 billion will be a loss to investors after recovery efforts are made, said Zandi. Those figures are higher than Federal Reserve Chairman Ben Bernanke’s estimates that subprime mortgage losses could hit $100 billion and threaten consumer spending. Bernanke’s comments came in his July 19 speech before the Senate Banking Committee.

Subprime ARM loans originated in the fourth quarter of 2006 are expected to be the poorest performing loans, with the foreclosure rate peaking at just under 20 percent in the fall of 2011. This is more than three times the peak foreclosure rate that is forecast for loans originated in 2004.

The deterioration of mortgage credit quality can partly be blamed on falling U.S. house price prices, with all parts of the housing market experiencing declines. The high-end of the market, however, is holding up a bit better than the middle- and low-end, said Zandi.

The erosion of mortgage credit quality will also be due to the fact that many borrowers will soon be facing measurably higher mortgage payments. October will be the peak reset month when about $50 billion worth of mortgages will be adjusted to reflect higher interest rates, he said. “As the resetting mounts, that will put significant financial pressure on many of the subprime borrowers and this pressure is already very intense,” he said.

The findings are based on consumer credit files from the credit bureau Equifax and cover 200 metropolitan areas in the United States.

 

[Randolph Kinney]

Bank warns hedge funds of liquidity crunch

Credit Suisse has warned hedge funds that banks' risk appetite, credit availability and global liquidity is in danger of evaporating "as fast as water off the desert tarmac", leading to more collapses such as that suffered by Sowood Capital, a $3bn (€2.2bn) US manager.

Credit Suisse warned in a paper by its fixed income analysts that banks are carrying a large exposure to new bond issues and, if they cannot sell them on, then "rightly or wrongly, the most natural response would be to sharply curtail other credit lines to hedge funds and smaller counterparties. Beyond a certain point that could precipitate a cascade of position liquidation".

The warning came the day after Sowood Capital, a US hedge fund manager, said it was winding down its funds. Its assets under management had been worth $3bn at the start of last month. It had been caught in a vicious circle of losses, margin calls and asset sales.

One banker said: "Sowood's mark-to-market losses led to more and more collateral demands by its prime brokers, and so it went on, until it could not pay any more."

The problem of falling risk appetite could easily spread, Credit Suisse warned. It might extend to the carry trade in foreign exchange, to commodity markets and to emerging markets.

"There would be a hiatus in the ability of private equity firms to secure funding for new deals," the report cautioned.

 

[Randolph Kinney]

Just A Quite Meltdown Of Cdo's

Oddo to Shut Three Funds `Caught Out' by Credit Rout

July 31 (Bloomberg) -- Oddo & Cie, a French stockbroker and money manager, plans to close three funds totaling 1 billion euros ($1.37 billion), citing the ``unprecedented'' crisis in the U.S. asset-backed securities market.

Oddo said it will wind down the funds within the ``shortest possible time frame'' because of a plunge in prices for collateralized debt obligations, notes backed by other bonds, loans and their derivatives.

The highest level of defaults in 10 years on U.S. mortgages drove the risk premium on corporate bonds in Europe to the widest in at least three years yesterday, based on prices for credit-default swaps. Commerzbank AG, Germany's second-biggest bank by assets, yesterday said it expects to make provisions of about 80 million euros for potential loan losses tied to the U.S. subprime mortgage market, and IKB Deutsche Industriebank AG in Dusseldorf said it was scrapping its earnings forecast as ``massive uncertainty'' threatens access to funding.

``Like many actors, we have tried to revitalize the performance of our funds by investing in CDOs,'' Arnaud Ploix, a spokesman for Paris-based Oddo, said in an interview today. ``Like others, we noticed recent problems with short-term liquidity and were caught out by the subprime dilemma.''

 

[Greg Bell]

Pending home sales are up , the goofballs will buying stock tomorrow.Talk about a clueless bunch of idiots...

 

[moh malekpour]

Pending home sales are up , the goofballs will buying stock tomorrow.Talk about a clueless bunch of idiots...

I bet 25% of those pending homes are REO and foreclosed sales. There are bargain hunters out there looking to pay 50 cents on the $ and lenders have to sell them.

 

[Tom Keyser]

"Pending" funding of loans?

Pending home sales are up , the goofballs will buying stock tomorrow.Talk about a clueless bunch of idiots...

After years of lurking I speak!

Pending,
Pending funding of loans?

The huge amount of loan money required to maintain these price levels and the increasing volume of forced sales is not coming soon and won't for many years this has happened before ref: U.S. 1930's & Japan 1990's.
Leveraged Big Gains turn to bigger loses. Once confidence is lost, It can take many long painful years before it can be re-established.
What multiples of money leveraged R.E. created will now be removed from the economy in the same multiples of leverage.

Any body want (or even have) money to loan for realestate? hello anybody?
I hear silence - just the sound of crickets on a summer's eve.
overseas R.E. funds have begun to fail, just like here.
again the sound of crickets.

This is a classic credit crunch, (fico score has never been more than a measure of potential level of indebted servitude) All debts will be paid, either by repayment by the borrower, or losses to the lender, but they will be paid in full. When that is done we can start anew.
TK

 

[moh malekpour]

Indymac to Make `Major Changes' to Mortgage Lending

http://www.bloomberg.com/apps/news?pid=20601009&sid=arI6xLXXeF34&refer=bond

Aug. 2 (Bloomberg) -- IndyMac Bancorp Inc. is making ``very major changes'' to its lending standards and may raise interest rates it offers on home loans because of a slump in mortgage securities, according to an e-mail to employees.

The market for mortgage bonds has become ``very panicked and illiquid,'' Chief Executive Officer Michael Perry said in an e- mail to employees. The Pasadena, California-based company will stop making certain types of mortgages completely, he wrote.

``Unlike past private secondary mortgage market disruptions, which have lasted a few weeks or so, our industry and Indymac have to be prudent and assume that this present disruption, which appears broader and more serious, might take longer to correct itself,'' Perry said in the e-mail.

The additional credit tightening by IndyMac, the ninth largest U.S. mortgage lender, comes in a period when it's ``difficult'' to trade even AAA rated mortgage bonds that aren't guaranteed by government-chartered Fannie Mae and Freddie Mac, or federal agency Ginnie Mae, Perry wrote.

``The private secondary market is not functioning,'' he wrote

 

[Workbox]

After years of lurking I speak!

Pending,
Pending funding of loans?

The huge amount of loan money required to maintain these price levels and the increasing volume of forced sales is not coming soon and won't for many years this has happened before ref: U.S. 1930's & Japan 1990's.
Leveraged Big Gains turn to bigger loses. Once confidence is lost, It can take many long painful years before it can be re-established.
What multiples of money leveraged R.E. created will now be removed from the economy in the same multiples of leverage.

Any body want (or even have) money to loan for realestate? hello anybody?
I hear silence - just the sound of crickets on a summer's eve.
overseas R.E. funds have begun to fail, just like here.
again the sound of crickets.

This is a classic credit crunch, (fico score has never been more than a measure of potential level of indebted servitude) All debts will be paid, either by repayment by the borrower, or losses to the lender, but they will be paid in full. When that is done we can start anew.
TK

I am so glad I paid attention in History class. And I remember the 80's very well. Cash is King! pay off your debts!

 

[Randolph Kinney]

Trouble at IndyMAC?

Difficult to trade even AAA bonds on private MBS, Perry says - MarketWatch

Private secondary mortgage mkt not functioning: Indymac CEO - MarketWatch

 

[Randolph Kinney]

Private secondary mortgage mkt not functioning: Indymac CEO

SAN FRANCISCO (MarketWatch) -- The secondary market that supports a large part of the U.S. mortgage industry "is not functioning," Mike Perry, chief executive of home loan specialist Indymac Bancorp said on Thursday. It's currently difficult to trade even AAA rated parts of private mortgage-backed securities, Perry wrote in an email to Indymac staff, which was posted on a Web site run by the company on Thursday. Only mortgages that conform to the standards of government sponsored enterprises such as Fannie Mae are currently trading, Perry added. "Unlike past private secondary mortgage market disruptions, which have lasted a few weeks or so. . . our industry and Indymac have to be prudent and assume that this present disruption, which appears broader and more serious, might take longer to correct itself," he wrote.