60 Minutes reports: A Second Mortgage Disaster On The Horizon?
We’ve been saying this for a long time… and for the record, Ill pull up a previous post from a few months ago with a very troubling graph showing the true impact of these new Alt-A and Pay Option ARMS.
From my April 24 post:
Recently, I have researched the impact and adjustment period of different types of adjustable loans. It seems by the end of 2008, most of the subprime adjustable loans will have adjusted at least on some level. Many in the media are speaking of the lending crisis ending at the end of this year. My data says differently. Beginning in Q1 of 2009 and continuing through Q4 of 2011, we will see an influx of new adjustables, ALT-A and Pay Option ARMS. This is just the beginning of the Tidal Wave as most of these loans are already in a negative equity state. See this Adjustment schedule for yourself. Month 1 is January 2007.
Foreclosure Storm Will Hit U.S. in 2009 as Loan Changes Fail
2008-12-11 – Bloomberg.com
“U.S. foreclosure filings climbed 28 percent in November from a year earlier and a brewing “storm” of new defaults and job losses may force 1 million homeowners from their properties next year, RealtyTrac Inc. said”
A total of 259,085 properties got a default notice, were warned of a pending auction or were foreclosed on last month, the seller of default data said in a report today. That’s the fewest since June. Filings fell 7 percent from October as state laws and lender programs designed to delay the foreclosure process allowed delinquent borrowers to stay in their homes.
“We’re going to see a pretty significant storm next year,” Rick Sharga, executive vice president of marketing for Irvine, California-based RealtyTrac, said in an interview. “There are two or three clouds that suggest a pretty heavy downpour.”
Rising unemployment, expiring foreclosure moratoriums and state efforts that “run out of steam” will push monthly filings toward the record of more than 303,000 set in August, Sharga said. The number of homes that revert to lenders, the last stage of foreclosure and known as “real estate owned” orREO properties, will increase to 1 million from as many as 880,000 this year, he said. …
Goldman Recommends Credit Default Swaps Against NJ, CA, WI, FL, OH, MI, Others
Mishes Global Economic Trends Blog -
The state of New Jersey is insolvent. Bankrupt might be a better word. New Jersey is $60 billion in the hole on pension funding and the Governor is planning on skipping payments in a “pension payment holiday” until 2012 so as to not increase property taxes. To top it off, the ongoing plan assumptions are 8.25%. Sorry NJ, that simply is not going to happen. ….
Inquiring minds are now reading that Goldman Draws Ire for Advising Default Swaps Against New Jersey.
Goldman Sachs Group Inc., one of the top five U.S. municipal bond underwriters, is angering politicians and public-finance officials in New Jersey, Wisconsin, California and Florida by recommending that investors purchase credit-default swaps to bet against 11 states’ debt.
Bets against public debt, once unheard of on bonds considered safe enough for retirees, have soared as the National Conference of State Legislatures projects recession-fueled budget crises will cause $97 billion of shortfalls nationwide over the next 18 to 24 months.
Jumbo Prime: ‘Walk Away’ Loans – More Downgrades Coming
2008-12-10 — ml-implode.com
“This story was originally released a couple of weeks ago but somehow did not make it to the blog. It goes hand in hand with the Moody’s downgrade of many Bank of America Jumbo Prime deals citing a 13% delinquency rate. This represents a total meltdown in the sector happening right now that nobody is reporting.”
Fed Ponders Issuing Debt to Finance Its Mushrooming Balance Sheet
This is a difficult one to wrap my head around. But the idea that they are trying to create a different class of debt is very troubling. The resulting confusion can’t be good for investors who were fooled by GSE AAA ratings based on “implicit” guarantees.
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Move Presents Challenges: ‘Very Close Cousins to Existing Treasury Bills’
By JON HILSENRATH and DAMIAN PALETTA – Wall Street Journal
The Federal Reserve is considering issuing its own debt for the first time, a move that would give the central bank additional flexibility as it tries to stabilize rocky financial markets.
Government debt issuance is largely the province of the Treasury Department, and the Fed already can print as much money as it wants. But as the credit crisis drags on and the economy suffers from recession, Fed officials are looking broadly for new financial tools.
Fed officials have approached Congress about the concept, which could include issuing bills or some other form of debt, according to people familiar with the matter.
It isn’t known whether these preliminary discussions will result in a formal proposal or Fed action. One hurdle: The Federal Reserve Act doesn’t explicitly permit the Fed to issue notes beyond currency.
Potentially, The Worst Housing Crash in American History?
2008-12-08 — doctorhousingbubble.com
“It is important to note that home building during the Great Depression dropped by 80% between the years 1929 and 1932. It is also the case that many families owned farms which clearly isn’t a factor in today’s market. But we can use current measures and try to determine how deep our current decline is in relation to the past. Keep in mind that when you read 1929 – 1932 you may get a psychological feeling that this was a short timeframe. Remember that in late 1929 we saw the peak of the stock market and the bottom wasn’t reached until the middle of 1932 and it lingered near the lows for a very long time. If we follow a similar timeline with our market peak in October of 2007, then we can expect a bottom in the summer of 2010.
Commercial real estate heading South
2008-12-08 — ml-implode.com
The default rate on commercial mortgage debt has remained near historic lows, even while residential-related debt suffered a severe downturn.
But that is now beginning to change, sending new shock waves into much-battered banks, private-equity funds and other financial institutions that participate in the $1 trillion commercial real-estate debt market.
Majority of Modified Loans Fail After 6 Months, Regulator Says
Bloomburg – 2008-12-08
“Most U.S. mortgages modified by lenders to help keep struggling borrowers in their homes fell back into delinquency within six months, the chief regulator of national banks said. “
Almost 53 percent of borrowers whose loans were modified in the first quarter of this year re-defaulted by being more than 30 days overdue, John Dugan, head of the Treasury Department’s Office of the Comptroller of the Currency, said today at a housing conference in Washington.
NFP: Joblosses Even Worse Than Reported
By Barry Ritholtz – December 8th, 2008, 6:34AM
Over the past few years, we have railed at the prettyfied numbers that come out of BLS regarding NFP job creation and the unemployment rate. From the Birth Death Adjustment to the understated unemployment rate, the official data (and corresponding headlines) painted a very misleading picture of what was going on. No conspiracy, mind you — just a creeping bias that has slowly distorted the data.
Hence, the past few years of aberrational, credit-driven economic growth was hidden from the public view. Many (tho not all) of Wall Street Economists were too hapless or cowardly to point this out. And some even cheerleaded the absurdity of the “Goldilocks” BLS data. Some simply declared the US a Nation of Whiners.
With the economy now in a full blown recession, and the Housing and Credit crisis getting worse, it hardly semed necessary to pile on BLS. Until Friday’s report. As bad as it was, looking beneath the headline data hows that it was worse — much worse — than reported. Consider the following:
Hanks Bad Gamble – CRITICS: Rescue Plan Bungles Make Profits Less Likely
2008-12-02 – NYpost.com
“All we’ve created is dead banks, not true value in their stock,” said Paul Miller, a banking analyst with FBR Capital Markets.
Of course the government just buying common equity stakes wouldn’t be so great either, unless they were going to get serious about taking an active stake in management, and forcing increased consumer lending.
But then, what exactly would we be left with? Not a private free market, that’s for sure. Almost makes one pine for New Deal-era direct consumer lending programs and work programs.
There seem to be no good solutions — no matter what Hank does, there are very serious (if not fatal) flaws with the plan. And by continously shifting plans, even more confusion is added, which is toxic to the market. Hank and Ben seem to want to do a little bit of everything, without really committing anything, which seems to be a horrible recipe for success.
Or maybe its just that every intervention is a bad intervention. Is this all really better than just letting the system fall apart so something new can take its place? As far as the list of things we were trying to prevent, the stock market has already collapsed (though it could go further), mortgage lendering is still too constrained for most people (given prices), and consumer lending is still being choked off. What exactly are we gaining from all this intervention and “official” uncertainty?
Understanding De-Leveraging, Merideth Whitney on Credit Cards
2008-12-02 - Optionamrageddon.com
If you want to understand de-leveraging, you could do worse than Meredith Whitney’s op-ed in yesterday’s Financial Times. She noted that $3 trillion of credit had been “expunged” from the economy so far this year. She also said credit card lines could be substantially reduced:
“I estimate that the mortgage market will shrink for the first time in US history and that the credit card market will be 18 months behind it. While just over 70 per cent of US households have access to credit cards, 90 per cent of these people use credit cards as a cash-flow management vehicle, or revolve payments at least once a year. While the credit card market is small relative to the mortgage market, it has grown to play a key role in consumer liquidity. Declining liquidity here will have disastrous effects on consumer spending and the economy. My primary concern is preserving liquidity to consumers, who command more than two-thirds of gross domestic product,” said, Whitney.
Private Mortgage Insurance Applications Continue Slide
2008-12-01 —thetruthaboutmortgage.com
“Private mortgage insurance volume sunk further in October as defaults continued to rise, the Mortgage Companies of America (MICA) said today.”
It’s official: US has been in a recession all year
2008-12-01 — yahoo.com
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