Wednesday, June 27, 2007

CFC Next?

Still a little slow plugging into my news sources. This from Reuters yesterday about CFC rumors.
A report on theflyonthewall.com indicated that Countrywide shares were down on "unconfirmed chatter of a subprime loan investigation." Countrywide is based in Calabasas, California.

60 comments:

Red said...

Firstness

Red said...

Firstness

Mike said...

I can also add a little gas to the fire. They're also being "investigated" by the bond rating agencies for placing loans in pools that do not meet the pool criteria.

Kitty said...

Murst? Murst!

lawnmower man said...

A quick IAFF-ish aside: are the regular comments about "living in tent cities and Hondas" some bubble in-joke I'm unaware of?

Rob Dawg said...

CFC is also holding a lot of subprime/alt-a loans in their own account that I suspect are marked nowhere near their market value. This might affect their banking divisons capitalization which might no remain contained. Man, 9500 people in Ventura County are direct employees. The multiplier effect has to be huge as well. If Amgen also stumbles you might as well write off this county for a decade.

chris said...

The gains are permanent, whoever said they aren't is obviously poor...

ratlab said...

Lots of higher priced subdivisions (read $700-800K+) in the Calabasas area.

I have a hard time betting against CFC. I did and lost recently. Their CEO has a knack of spin doctoring negative news into something positive. He crows about how with the sub-prime implosion, CFC has a greater share of the Alt-A market with all the smaller mort originators going out of business.

Hal F. Wit said...

CFC has enough exposure to sub-prime mortgages that its current stock valuation is questionable. If the lending problems move into prime or the entire sector comes under additional pressure, it is almost certain to fall to the $30 level and is subsequently a good short. Its other loans marked as "prime" on its 10-Q may actually be ALT-A to borowwers with "prime" credit. ALT-A....including liar-loans, Option ARMS, ARMS etc.... WTF!

Disclosure:
I have a short position CFC January 08 $30 Puts at an average of $1.10 per contract.

Property Flopper said...

Rob Dawg -

I wouldn't sweat Amgen, they're got a fairly decent pipeline going through clinical trials. I expect they'll be strong for the next decade at least.

Property Flopper said...

Scratch last...

Adjust to "They'VE got..."

Got to learn to proof before posting...

Rob Dawg said...

PropFlop,
And you think the multi-hundred acre site in Longmont Colorado is for the finance department? Areospace left, Kinko's left. They all leave.

Anonymous said...

https://www.tdnam.com/trpItemListing.aspx?&miid=7719233


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damm couchsurfer.com ios already taken but it says it has a nice flashy popup that says ive won the daily prize, actually every time i refresh the page it keeps saying im the daily prize winner, i must be really lucky, sweet! good things are coming!!!

Property Flopper said...

Rob -

Ah... I thought you were more worried about them pulling an "oops" (like the Chiron flu shot problem).

They could move, but it would be a long process. Hard to get your employees to up and jump to another state. Easiest way is to move select people and hire all new positions at the new location... more an evolutionary move than a quick jump.

Time will tell.

BelowTheCrowd said...

Rob,

Your comment is exactly what I was going to point out.

Amgen currently has a "zero growth" policy in California. I was just discussing this yesterday with a friend who is fairly senior in their manufacturing supply chain area. She's looking for a new position internally due to an impending reorganization and finding very little or nothing that would not involve a step down or relocation. People who have jobs are hanging on to them, when people leave their replacements are hired elsewhere, and entire departments are being shipped out of state.

Thank our state government for that.

She's thinking of leaving, but that too would probably involve either a cut in pay (at least in the short/medium term) or relocation, or a 1-2 hour commute, or some combination of all the above.

This isn't completely fatal, but if you combine it with any kind of a downturn or a single big drug failure and it'll get very bad very fast. Trust me on that one. I had the distinct displeasure of witnessing what happened to Pfizer (admittedly a poorly run and bloated company compared to Amgen) earlier this year. Since I was a vendor with a contract, they couldn't walk me out the door right away as they did to many of their regular employees. Pharma/biotech is notoriously high risk. Building a local economy around it -- and especially around a single company -- is playing with fire.

And it's not just her. In her Thousand Oaks subdivision she beleives that as many as 50% of the owners have at least one wage-earner, and sometimes two, at either AMGN or CFC.

It's not that there aren't other jobs, but anybody leaving Amgen who wants to stay local is looking at a major pay and benefits cut.

-btc

Rob Dawg said...

PropFlop,
I see it all the time. First the "ancillary" functions are moved as a cost savings move. Face it getting low level number crunchers to move to Thousand Oaks is a tough sell. Then "corporate" outgrows quarters and the campus is left to the scientists. Then "consolidation."

mejustme said...

It's been days since we've had any juicy revelations! Is someone holding out on us or is the well really dry?

I sure would like to know (specifically) why Casey got the heave-ho from his hosts. And of course the rest of my questions.

Anybody got any dirt at all?

Anonymous said...

I hope they tank. Maybe that will get the feds interested in the crimes "loosers" like Casey committed.

Don't be a Casey!

Rob Dawg said...

And it's not just her. In her Thousand Oaks subdivision she beleives that as many as 50% of the owners have at least one wage-earner, and sometimes two, at either AMGN or CFC.


We are seeing the same things you and I. The thing is they can only afford that house when both are working all the time. Scary and sad. Sad because the worst employees are goingto be let go in the first round and they'll get out with some skin to work for a cosemetics company in Tuscon or Fort Worth. The best will be held until all opportunites are closed for them. These are all top of the pyramid jobs. When they go the multiplier effect crushes local business. And just try to get Amgen to admit to their expansion plans. I understand the policy but get angry at the dishonesty.

BelowTheCrowd said...

Rob,

With their acquisitions in recent years, they've got quite a bit of science outside of Thousand Oaks as well.

To the extent that they're growing the science part (mostly by acquisition), it's happenning elsewhere. To the extent that they're consolidating the science they acquire into new sites it's to Colorado.

The administrative functions are already being moved, or split up. As I noted, the common practice is to replace people who leave with "remote staff" elsewhere. Eventually a tipping point is hit and the entire department (perhaps with the exception of a VP or two) gets moved. Many of the rank and file are happy to take the relocation.

Finance, marketing, supply chain and manufacturing are areas that are already getting shipped out.

While the new campus is really cool and pretty, it's also quite obviously designed with a "core" surrounded by lots of other buildings. My guess is that the long term plan is to keep the "core" buildings and get out of everything else.

It won't be overnight, but it's already started. And it only takes one failure for them to be forced into major cutbacks. Betting against such a "black swan" in biotech is generally hazardous to your pocketbook.

-btc

Ryan Davison said...

You guys have probably been here, but after posting a comment at IAFF, my awesome blog that gets like 3 hits a day (www.ryandavison.com), got this one.

http://iamfacingforeclosure.com/wp-login.php?redirect_to=%2Fwp-admin%2Fmoderation.php

Rob Dawg said...

juicy revelations! Is someone holding out on us or is the well really dry?

That sizzling sound isn't the weather, it is the popcorn getting ready to pop. We are definitely holding out. I've been barely even hinting. Sometimes it works out this way. Refunds are always available to dissatisfied customers.

Anonymous said...

There's a lot of younger couples/people who have never really gone through bad times, they were never really effected by 9/11 or the tech bust. Very few people I know have ever really questioned themselves about how far they are willing to downsize their own lives to get by - and that question is going to be very, very important in the coming years, and will lead to a lot of divorce and broken homes.

Too many people never think about what happenes when the gravy train ends...they just assume it never does.

The kids are gonna freak out too, when they don't get the new Ipod when it comes out, or their cell phone is shut off because mom and dad can't afford it, or, god forbid, they have to pay for a car themselves, let alone the big picture stuff like moving into a smaller home/apartment/condo, not getting a full ride at a top college, or a house as a wedding/graduation present.

Oh, yeah, lots of pain coming.

BelowTheCrowd said...

Anon,

One of the most chilling posts I saw in the past month regarding the iPhone was the college kid who stated something to the effect of:
"Of course everybody's going to get one. It's going to be a must-have thing if you want to be cool. I don't care about the price, dad's going to pay for it."

And for more, take a look at Stephanie's post yesterday.

Or for a broader picture, the post on my own blog about "Turkeys."

It's pervasive, and it'll be very bad when it ends. Those who have believed nothing could go wrong are going to end up in that turkey-like condition...

-btc

Rob Dawg said...

Amgen has an interesting problem. Their senior science staff is socially embedded in Ventura County and they are huge stockholders. Soon however a lot of them will have seen the last kid off to college and their projects transitioned and the next opportunity in Oregon or Colorado or Boston. Hughes Helicopters killed themselves with a similar strategy when they relocated and left all their senior staff in the beach cities of LA County. They never recovered.

Jean Valjean said...

btc:

to that end, I think it's perfectly appropriate to quote from JimBobJoeBobJim's post some time back:

"Oh Gen-Y, where to begin. You are all beautiful, special little snowflakes, and no one can tell you differently. You are spoiled little brats. Things have been so good for you for so long, you are not going to have any idea how to deal when things turn to shit, and mommy and daddy can’t bail you out. And it’s coming. I know, I know, I am a mean person, a “hater”, for not presenting life as anything but rosy. Don’t worry, you are all special, beautiful little snowflakes, and I want to kiss you all on your precious little heads. All I ask is that you don’t cry to me when your H3 is repo’d when things go to hell."

-JVJ

Sprezzatura said...

One of the regets of my life is that I didn't really understand my grandparents until after they had passed on. I do now.

They came of age in the Depression, and it wasn't until I'd weathered a few years of tough times without a parental safety net that I started to understand on a visceral level where they were coming from, their world view, and why they made some of the choices they made.

By and large, I don't like to see people suffer, but I also think that a little suffering might be a necessary part of the maturation process. These kids may or may not ever get that.

The Dude said...

From the "Don't be a Casey" blog topic: Let’s not forget that Casey did see some success early in his real estate adventures but like most gamblers who don’t fully understand the rules he lost it all in the end.

Puh-leez, Casey had ZERO success. The market had the success, Casey was simply occupying time and space. He bought the condo, could not afford the payments, took in renters who didn't pay, and then sold it before the bank foreclosed. A dead cat could have done as well.

king friday the 13th said...

I've seen studies that indicate the next big wave will be outsourcing within the US. Indian software engineers now make $25-30K per year, and that number is increasing 25-30% per year. Given the overhead of offshoring and strengthening rupee,
$50-60K per year to a software engineer in say Buffalo, NY (in a $35K house) looks quite the bargain.

Mouse And Pencil said...

Look for multi-generational households to become normal again, grandparents, parents, and kids. Be interesting to see what happens with the nursing home industry as fewer boomers can afford to park their parents there.

Those Mcmansions hold a lot of people...they may need the space.

"That sizzling sound isn't the weather, it is the popcorn getting ready to pop. We are definitely holding out. I've been barely even hinting. Sometimes it works out this way. Refunds are always available to dissatisfied customers."

Just one question, should we get individual bags, economy bags, or the Costco Barrel O' Pocorn?

king friday the 13th said...

My grandparents lived on a farm during the Depression, so things weren't that bad. In the 1930's, most people lived on farms or were "just off the farm". Thus, the US came through socially intact.

In the upcoming depression, I think if you have plenty of ammo and are a decent shot, you should do okay. A whisky still could prove useful (bartering and such). But, ideally, plan on leaving the major metro areas.

BelowTheCrowd said...

Rob,

This is correct, but getting less so every day.

Much of the science that is important to their future has been acquired along with other companies. In fact, they are one of the biggest acquirers of biotech companies and IP.

That stuff is all elsewhere and will stay elsewhere pretty much permanently.

Amgen is making what I believe to be a smarter move than Hughes. They're growing a new senior staff elsewhere, using some resources they hire themselves and some that they acquire. They know the 17 year patent rules. They know that the guys who made the last blockbuster probably won't make the next one. They're investing in the guys who will make the next one, sutaining the guys who are sustaining the old ones, with the knowledge that the "old" folks will eventually leave or be squeezed out by shifting priorities.

Best indicator for when such things are likely to happen is simple. Look at the CEO. Typically companies tend to be built where the intial CEO/founder wants to live. Subsequent ones rarely have that choice.

Binder retired in 2000. That's about when Amgen started consolidating its campus and investing heavily elsewhere. Look at Sharer's bio and you'll see he does not have the same attachment to the area that Binder and the founding generation did.

Same happened to Intel when Andy Grove started phasing himself out. Same happened to aerospace when it started being run by guys from the governent procurement business, rather than by SoCal "aerospace" guys. You don't have to look far to find hundreds of examples.

So the question for your area is:

What happens now that one of the most important job-creating individuals (Binder) has already retired, and the second one (Mozillo) is likely to in the next few years? Sharer has already demonstrated that he doesn't feel the need to keep Amgen focused in California. Does anybody believe that the next CEO of CFC is going to be as dedicated to growing a huge monument to himself in Calabasas?

Watch the CEOs. They tell much of the story.

-btc

Bohica said...

Any parent who has given thier children everything they ever wanted, without ever earning even a part of it, is a fool.
Yeah, our child is now 36 and a VP at a Wall Street house, but when she was 15 I fired her from her dishwashing job at home, (her spending money).
When she asked me how she was going to get her allowance, the answer was: "not by doing dishes'.
It has been a road with potholes and dangerous turns, but the product my wife and I have loosed into the world has money in the bank, her own home, and realises that "money talks, bullshit walks"

Rob Dawg said...

Concerning popcorn. I suggest the tub-o-cholesterol extra large with free refills. Considering the price of admission (free) paying for the overpriced snacks (also free) is the least you can do. The observant will have plenty of warning.

king friday the 13th said...

>> Be interesting to see what happens with the nursing home industry as fewer boomers can afford to park their parents there.

In many states, Medicaid covers nursing homes. I have seen 2 people in the SAME room in the SAME home, identical treatment. Only difference was 1 sucker was paying out of pocket, while the state took care of the bill for the other.

Indiginent have it better off -- no assets to worry about. Show up on the state's doorstep and they will take care of you.

Rob Dawg said...

BTC, you say it so well I want only to share the summary of decades of studies as to the top three priorities when a company relocates;

1. Where the CEO wants to live.

[there are no rules 2 or 3, see rule 1]

Mocha said...

Hi everybody!!!

(waves)

MexicanMike said...

Yesterday, after Bob Shillit posted a small story the Casey's book publication, I thought I shoot him an email at the SacBee:


Bob,

Reading this small passage in the Sac Bee and giving publicity to a scammer like Casey Serin is just sick!

Did you actually do research on this guy, how he took out fraudulent loans, maxed out his credit cards (170K+) and made note that he never intended on paying any of the money back.

It’s media like this that pats criminals on the back and rewards them for their unacceptable behavior. I’m sure O.J. book would have been taken so light hearted, right!

“Due out this fall is "The Foreclosure Code," a self-published book that tells how the 24-year-old racked up $2 million in debt last year after acquiring eight homes in a space of seven months - just as the real estate market was turning south.”

You should have included “fraudulently acquiring eight home” to better describe his actions!!

When is the media going to get it right – when are they going to tell the truth about Casey! When is the newspaper going to give hope to people that will fight criminals like Casey!!

A rewrite is necessary on your part! People are demanding it.- read his blog! Understand what a pompous manipulating deadbeat husband and person he is! Did you know he left his wife to face all the bills while he took off to Australia with little money? Out the door within a hour to “vacation” in Australia, what a man Casey is, right?”

I hope you read my letter and think about this! I would appreciate a response to show that you actually care what I have to say.

Thank you



His response that came back this morning:


Thanks for your note, Mike.

I may indeed do a follow-up on Casey Serin and his questionable activities. But please be aware that I have to be careful about what I write. Calling him a felon and saying he used fraud to obtain loans could open me, and the Bee, to a libel suit. That's true even if he admits on his site that he used shady practices to get his loans.

Regards,

Bob Shallit



I really didn't like his response, cause it lacked the sense of urgency that I was looking for. But hey, as this CountryWide investigation becomes fruitful maybe their investigate Casey's two loans he got with them and then Bob will see an incentive to report the "Good Things That Are Coming"!

Property Flopper said...

Mexican Mike -

The guy doesn't care about Casey's loans, he just wanted to do a fluff piece. The crap about opening him up is bogus, he's just using that as an excuse.

If he's that worried, he can phrase it carefully: "Casey's self-admitted fraud" is safe - he has, in fact, admitted fraud. Truth is always a defence in libel / slander cases. Reporters know this and know how to use it.

The Sac Bee has never been much of an investigative newspaper. Not surprised they don't want to follow the story.

walt526 said...

If Bob wants to avoid a libel suit, he could have just quoted Turdflake directly. He has repeatedly--on his blog, podcasts, media interviews, etc--referred to his activities as fraudulent. If he wanted to hedge a little, he could have used one of the many "What I did might have been considered illegal/shady" quotes.

I don't know if it exists already, but a good CaseyPedia page would be one that chronicles each and every time that Turdflake openly admits to committing fraud to obtain the loans. Reference each link to an interview, blog, CashCall phone call (?), or podcast transcript. In addition, if anyone out there has a background in white collar criminal prosecution can write a brief basically outlining how Turdflake has met the statutory requirements of fraud...

walt526 said...

"The Sac Bee has never been much of an investigative newspaper. Not surprised they don't want to follow the story."

Indeed. They are much more of a digest of other publication stories than a real, hard-hitting newspaper (I've lived in the Sacramento area for 5+ years). Which is why I consider them to be more of a local paper than a true newspaper of record. Some of the local TV stations (like KCRA) have done much more extensive investigations into mortgage fraud (as well as other issues, like levees and municipal finance).

Legal System said...

"Predatory lending practices and improper disclosure of terms may violate state consumer-protection and fair-lending laws, Machado said."

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aJp84dFMpeps

"may" violate state consumer-protection and fair-lending laws?

What?

Were going to make you a great $500K loan on a 100% 80/20 interest only with an average interest rate of a low-low-low 10.5%.

And to help you out (cuz we want to make this easy on you) we are going to throw in a $25K prepayment penalty for 3 years.

Oh, and one great feature of our loan is the Neg-Am feature that we won't really even tell you about when you ask what your payments are. You will find that out later when you suddenly realize that your loan balance is going up $1,200 a month.

So, as property values plunged by 7%, my loan balance went up $15K (loved the secret Neg-Am feature), the bank wouldnt waive the $25K prepay penalty. With all that there was no way I could get a refi.

So sell then.

Property value loss: $35K
Prepayment penalty: $25K
Neg-Am increase: $15K
R.E. Commission: $25K
Closing Costs: $5K

Total: $105K

It's better just to "Walk and Rent"

You know what? You can have this trap of a loan back.

Oh, and you can also have the house too.

No thanks.

someotherpersonaltogether said...

I don't know Who's Next. But this thing is not going to be pretty and we all know that. I live in an area where housing tracks pretty well with wages (at least according to the charts I've seen) and I'm seeing foreclosures amongst my acquaintances, friends, and, yes, even family. Most of them with ARMs, some of them Alt-A paper with traditional 30 year fixed mortgages that could not survive a layoff.

I am beginning to feel like I am watching Rome burn. I'm in a good position but we all know how that goes.

serinitis said...

Bob Shallit's article had a full color picture of Casey's book and a large font heading on the front page of the business section.

His contact info is
Bob Shallit
916.321.1049
bshallit@sacbee.com

someotherpersonaltogether said...

If you want some good news, the Bald Eagle is being removed from the threatened species list. There are ~9800 breeding pairs in the wild.

G's G Spot said...

I think CFC is going to be fine. They are just going to need to come up with a new "product" such as the 40 or 50 year loan, or "rent your house from us" loan. CFC is the servicing company for my loan, and every month I get at least 2 pieces and 4 emails of new offers (products) that they can use to lower my payments or consolidate my bills.

king friday the 13th said...

G's G --

yeah, I'm surprised the more creative comapanies haven't invented the 50 yr mortgage yet.

In Japan, at the end there were 60 year mortgages -- you and your child would take out the mortgage together. That innovation hasn't made it to our shores yet. So maybe this bubble still has room to run?

who knows?

Serin is as Serin does... said...

@ ratlab 10:49 and Hal F. 10:51--

I think that Countrywide, regardless of their spin doctors' ability to make the press buy their happytalk, is going to eventually tank under the weight of their laughable lending practices. It's one thing when a (relative) handful of people are feeling the sub-prime pinch--it'll be quite another when the nationwide fallout is impossible to hide from the average American's day to day existence.

Just my .02!

Mouse And Pencil said...

Awesome news on the bald eagle - I've become a huge fan after seeing them in the wild up in Alaska - I've never seen anything with as much attitude as a bald eagle, and they can back it up. (And learned how annoying it is when it's nice and quiet, and they smack into the water to go get a fish and startle the hell out of you)

Gorgeous birds, pure predator.

Dolph said...

OT - Casey is a retard. Another day, another boring blog entry. Does he not understand his audience? There is no way in hell his site is GAINING visits with crap content like that.

Also, why is the media giving this dork a get out of jail free card? Does the press even do their homework anymore or is the subject taken as face value.

My oh my, what is happening to this country? Damn...

(Ex) Train Wreck Watcher said...

I've suspected for some time that the big market downturn would be triggered by a major, high-profile financial company, previously seen as safe, collapsing--and the first candidates on that list are CFC and IndyMac, but especially the former.

CFC has way too many alt-A loans in its portfolio--prime or not, those things are much higher risk than traditional loans. But the big story is not just the alt-A status, but what those loans specifically are--option ARMs. CFC is loaded to the hilt with option ARMs, and in fact I've heard that as much as 60% of their income has come from (unrealized) gains on option-ARMs. That's beyond "creative finance", into the realm of Ponzi finance.

And yet their stock has so much as to register even a hint of the despair inflicting their neighbors in the sub-prime industry. Mozillo is a master spin doctor, but the question is if he can keep the spin up until he can get himself and his interest out. The fact is there is nothing his spin can do to bring cash in if/when the holders of the underwater ARMs his company owns walk away from their houses when their rates reset.

The Dude said...

Bald Eagle is being removed from the threatened species list.

Good news for landowners who have had to abandon their own land when a nesting pair decided to show up.

Bemused Guy said...

I suppose this is why I am getting weekly calls from CW with the usual bait & switch. "We've reviewed your records and think we can lower your rate & payment schedule" only to be turned over to an agent wanting to get me to sign a HELOC.

I have to admit, they have been fun to toy with...

Sharky said...

M&P:

"Just one question, should we get individual bags, economy bags, or the Costco Barrel O' Pocorn?"

Y'know what those mega-monster bags are good for?

Sprinkle over some stiff's car, especially if you're near the sea.

Starts a seagull feeding frenzy, bu more to the point, it starts a seagull pooping frenzy...always a gas!

Rob Dawg said...

The threat of collapse is still small but I can imagine how it can happen. When the defaults start to occur in large numbers the response will be critical. If the lenders let the borrowers off with no substantial consequences they risk a rush for the exits. They need to agressivelt pursue early defaulters so that people on the edge think twice before trying to walk away from their obligations. The Casey Serin story worries me in this respect. CFC should have placed an entire team on his case screw the cost. Now they are faced with thousands who see he got away with it, why not them.

Mozatta said...

Here is the funniest part from the Sac Bee article: "Serin, whose story was published by the New York Times and other national media, says he's also seeking to sell his Web site -- www.iamfacingforeclosure.com -- to investors for $100,000."

Is there really people out there that think he's going to try and pay debt off? Is there really people this gullable?

Mozatta said...

Sorry, it didn't copy what i wanted. So here is the actual part that I find humorous:
"His hope: Use investor funds and proceeds from book sales to pay off his debts and accumulate cash for new -- and presumably wiser -- real estate purchases."

BelowTheCrowd said...

My own bet is that the next big leg down in the market will come from a "liquidity event," but not sure it'll be from a finance company collapsing under the weight of it's debt portfolio in a liquidity reduced world.

I suspect it'll be a "rhyme" of 1989. One of these insane private equity deals is going to founder when the buyout firm can't come up with the financing. Right now virtually the entire market is being supported by the notion that virtually everybody is a takeover candidate. Take that away and look out below.

-btc

Anonymous said...

Casey

Anonymous said...

King friday,

A sixty year mortgage wouldn't really be an innovation for the US market, we already have the infinity year mortgage (I/O).