Housing Bubble Bursting?

[Randolph Kinney]

IndyMac's plan - no more ALT-A loans

IndyMac to shift focus to prime loans

IndyMac Bancorp Inc., one of the country's 10 largest mortgage lenders, outlined Tuesday a drastic strategic transformation in response to radical changes in the industry and said its loan volume would drop considerably as a result.

The lender said Tuesday that 90% of the loans it made from now on would be of the type bought by Fannie Mae and Freddie Mac, which buy nearly all prime mortgages made for less than their $417,000 maximum.

The other 10% of IndyMac's volume is expected to be prime home equity loans and prime jumbo mortgages.

Richard Eckert, an analyst at Roth Capital Partners in Newport Beach, expressed doubt that IndyMac could successfully move from its niche to making prime loans, a traditionally high-volume, low-margin business.

 

[Randolph Kinney]

I didn't know Fannie and Freddie "guaranteed" loans. Is this something new?

No, it is not new. However, that guarantee by the GSE is an implied guarantee by the U.S. government, or so the investors who buy GSE paper believe. It has never been tested.

 

[Randolph Kinney]

Rating agency won't eat its own dog food - housing problem getting worse

Contraction in housing market to be worse than expected in rest of 2007 - Fitch

MUMBAI (Thomson Financial) - Fitch Ratings said the contraction in the US housing market is likely to be more severe than anticipated during the rest of 2007, mainly due to tighter mortgage standards and disrupted mortgage markets.

The rating agency added it sees 2008 to be another challenging year for the housing sector, as it expects operational and financial pressures not only to persist but to intensify for public homebuilders.

Fitch said it is lowering its ratings on most of the public homebuilders and has put a negative rating outlook on most of the homebuilders.

It considers excess inventory as the most challenging issue for housing, both new and existing.

Fitch assumes that year-over-year declines in starts, new home sales and existing home sales will be more pronounced during the last five months of the year.

 

[Austin]

No, it is not new. However, that guarantee by the GSE is an implied guarantee by the U.S. government, or so the investors who buy GSE paper believe. It has never been tested.

Doesn't the fact that loan guarantees of the GSE's being implied and untested amount to an act of fraud on its face. The GSE loans are either guaranteed or they are not guaranteed. To say that their loans are guaranteed is implied is the act of fraud. Couldn't the government, and doesn't basic financial market transparency demand, that the government answer that question and replace implied with a basic yes or no? Remaining silent on the issue just facilitates the on going fraud and makes the government a party to the conspiracy to defraud the investor. Notwithstanding the fact that the entire mortgage morass is nothing but a Ponzi scheme at best.:new_all_coholic:

 

[Greg Bell]

Fannie Mae does have ANY guarantee.Many think that it's to big to fail , maybe not....

 

[Randolph Kinney]

Doesn't the fact that loan guarantees of the GSE's being implied and untested amount to an act of fraud on its face. The GSE loans are either guaranteed or they are not guaranteed. To say that their loans are guaranteed is implied is the act of fraud. Couldn't the government, and doesn't basic financial market transparency demand, that the government answer that question and replace implied with a basic yes or no? Remaining silent on the issue just facilitates the on going fraud and makes the government a party to the conspiracy to defraud the investor. Notwithstanding the fact that the entire mortgage morass is nothing but a Ponzi scheme at best.:new_all_coholic:

Austin,
Fannie Mae and Freddie Mac are quasi-federal agencies. They are not true federal agencies. They are mortgage companies that have their capital structure in the private sector. They are regulated by the Office of Federal Housing Enterprise Oversight. Both Fannie and Freddie guarantee their mortgage backed paper that they sell. That guarantee is backed by their capital structure. It is not backed by the U.S. Treasury. The U.S. government issues no guarantee of the Fannie / Freddie paper. Investors in Fannie and Freddie paper believe there is an implied gaurantee by the government in so far that if at any time either enterprise cannot make good on its paper, the government will stand to make good on the obligation. That has yet to be tested.

FHA and GNMA paper is backed by a government gaurantee. They are federal agencies with no capital structure in the private sector.

 

[moh malekpour]

So, Indymac is going to survive, cut the Alt-A mortgage all together, do only prime loans that can be sold to Fannie and Freddie, do a little Jumbo on the side and reduce its lending activity inorder to play safe and sound.

Countrywide with the support of BoA may survive, cut all sub primes and garbage loans, cut its business to half or third, do just prime loans and may be some safe Jumbo on the site.

Then, who is going to offer loans to those expensive homes in most areas of CA? I think, CA homeowners who enjoyed the housing bubble in last few years are going to have a tough time to face the reality that their home prices may come back to earth.
If they can find a lender who is going to do jumbo, it is going to be at least 1% above the prime rate, may require PMI or 20% down and an excellent credit.

http://www.cnbc.com/id/20492729

The subprime mortgage crisis is spreading to a somewhat unexpected place: homes costing more than $500,000.
Sales of expensive homes have fallen sharply throughout the U.S.

As lending has rapidly gotten more restrictive for borrowers taking out large loans, sales of expensive homes have fallen sharply around the country during what should be one of the busiest seasons for buyers and sellers, mortgage bankers and real estate agents say.

 

[Randolph Kinney]

Investors throw in the towel, defaults rise

Investment homes make up a major part of defaults: MBA

WASHINGTON (MarketWatch) -- Mortgages for investment properties constitute a major chunk of defaults in four states with the fastest-rising rates of seriously delinquent loans, according to data released Thursday by the Mortgage Bankers Association.

Mortgages on non-owner occupied properties in Nevada accounted for 32% of prime mortgage defaults as of June 30 as well as for 24% of subprime loan defaults, the MBA said.

In the rest of the country, non-owner occupied homes accounted for 13% of prime defaults and 11% of subprime defaults.

 

[Austin]

I am sorry but I don't get it! I just checked the headlines over on the Drudge report and here are the featured headlines:

Economy grows at 4.0 or 4% for last quarter.

Massive Condo Melt down in Miami. 23,000 excess units with 40,000 more on the drawing board with no sales.

What I get out of this is that a bubble crash and liquidity crisis is good for economic growth. Why didn't I think of that.

 

[Pamela Crowley (Florida)]

Boom of condo crash loudest in Miami
The pain is acute here but unbearable in S. Florida.
http://www.orlandosentinel.com/business/orl-condobust2707aug27,0,2001796.story

Big real-estate slowdown spurs legion of condo opportunists

The real-estate broker launched Condo Vultures Realty last year near Miami, the nation's most glutted condo market, to prey on speculators drowning in monthly payments for condos they never intended to own...

http://www.orlandosentinel.com/business/orl-vulture2607aug26,0,5170454.story

Left in the Lurch
Florida has one of the highest foreclosure rates in the nation. But the downturn in the residential housing market has left plenty of other problems in its wake, including increasing numbers of construction defects.
http://floridatrend.com/industry_ar...4537513.613847.1760198.4901102.542&aID2=47210