It's just like watching a soap bubble. You keep thinking it can't get any thinner or unstable then... pop! Looks like nobody wants to be in a market where Wells Fargo raises Jumbo Prime rates to 8% and Novastar appears to have ceased originating. (update: BJ corrected mytype)
Friday, August 03, 2007
Somebody Send My Stomach Along Later
It's just like watching a soap bubble. You keep thinking it can't get any thinner or unstable then... pop! Looks like nobody wants to be in a market where Wells Fargo raises Jumbo Prime rates to 8% and Novastar appears to have ceased originating. (update: BJ corrected mytype)
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39 comments:
FF&M Loosers
@Rob Dawg..
Isn't 'eaises' supposed to be raises?? (main section comments)
Roller coaster at top to track.. and there is no more track!
BS sufficient liquidity to weather a perfect storm. Trading tip, when they have to say things like that they are in such bad shape that they'd rather lie than take any more hits.
I don't think the question is how much it will affect the companies involved, as much as it's whether the companies involved will even survive.
Who survives? Here are my votes:
AHM: Done and gone.
NFI: No.
LEND: No.
CFC: No, but they're going to hang on for a while yet, just long enough to put the hurt on some of the shorts.
MTG: Too close to call, but they're definitely in a lot of trouble.
MBIA: Too close to call.
IMB: Not sure, I'd have to look closer at their portfolio.
BSC: Yes, but it may be because the markets and the Fed will make sure they don't fail.
FNM: Ditto.
FRE: Ditto.
HSBC: Yes, but they're going to take a lot of damage.
Jim Cramer: Yes, although his credibility is going to continue to suffer.
Herb Greenberg: Uh, yes. He may be taking victory laps regarding his call on NFI and the sub-prime sector for some time yet, but he deserves it, he was dead-on and called the sub-prime meltdown long before it happened. Nobody can say they weren't warned.
Rob RE: 8% jumbo
Yeah i did a double take when i saw that. 125 bps in 1 week says something about the level of fear and the re-adjustment going on in the credit world.
CFC: No, but they're going to hang on for a while yet, just long enough to put the hurt on some of the shorts.
Conditional "no." They'll metastasize the thirft will get FDIC protection, the stockholders will get a bottom feeder, Tan Man will use his $400m to rise again with a smaller version or else captain a merger of equals.
Dawg, did you see CFC's press release yesterday?
[125bp bump] I don't think even the new speads are enough to cover the real risk. BTW took my 10y futures off two days ago for a 22% 1 week gain. My take on risk:
Subprime = 1 paycheck from disaster.
Alt-A = 2 paychecks.
Prime = 8 weeks from NOD or jingle mail.
Jim Cramer's latest; I suspect he isn't the only one crying for cheap credit from the Fed:
Jim Cramer's Stop Trading! Wake Up, Bernanke!
"The Fed is asleep at the switch, Jim Cramer shouted Friday on CNBC's Stop Trading! segment."
"Cramer said Federal Reserve chief Ben Bernanke should 'open the discount window' and cut short-term interest rates. He said the pain being felt at financial firms like Bear Stearns and Accredited Home Lenders shows the Fed isn't paying attention to what's going on in the real world."
"'This is not the time to be complacent,' Cramer said, calling the collapse of the U.S. mortgage market a crisis."
Pretty much agree with the sentiment of the posters above. Although personally, I think the situation at CFC is analogous to what existed in Enron or Worldcom. Mozilo has a big mouth and usually speaks from both sides of it. But something always struck me as shady over there. Not to say that the other lenders are angels. But CFC just glows brighter on the proverbial snafu radar. At least in my opinion.
My suspicion is there will be some federal indictments associated with that company and an SEC investigation. All that insider selling whilst at the same time spouting "everything's fine" to the shareholders is not going to bode well for them IMHO.
LEND is a tricky one. On the one hand, they are clearly up shit creek with their lending practices and they missed their filing date. But on the other side, their acquirer still seems hell bent on buying them. So not sure about that one.
@Tom: "Although personally, I think the situation at CFC is analogous to what existed in Enron or Worldcom."
Agreed. Mozilo has been too high profile a figure, and has opened his mouth too many times, and has cashed out too much money, to not be a target. If (when) CFC collapses, the lawyers and the Feds are going to be digging through everything connected to him to see if they can get something incriminating. If they get their hands on real evidence, the lawsuits and criminal charges will be swift in coming.
With respect to LEND, bear in mind that private equity deals are also in serious trouble, as buyers for LBO bonds have disappeared. I just saw an article today that the banks have had to keep billions of dollars of LBO bonds on their own books because they couldn't pass them on. At this point, any deal that is not absolutely guaranteed, with buyers for the bonds already committed, could be in jeopardy.
@FMW
I would suggest paying one week early, keeping records religiously. If you have free electronic bill pay, use it. Mortgage securities holders are looking for a way to stem the bloodletting, preferably by cutting someone else's arm off.
The key in your situation is your low LTV. The securities holders see the liquidation value. From your monthly payment, I would say you may also have a low interest rate. This is something else the banks would like to change. Yes, you have 5 days... but if something happens in the last two days, you don't have much time to make corrections.
It isn't worth making payments at the last second when you have a good thing locked in. The mortgage companies will use any trick they think they can get away with, to 'unlock' you from that good thing.
Tom, the gubbermint and the SEC are in bed with the Mozillos of the world. The SEC would be more likely to send the tan man Tangelo hookers and cocaine than an indictment. Wake up and smell the corruption dude.
CFC is gonna crater my local economy. 9500 jobs, 3%+ of the total jobs with monster local ripple effects. And office space, everywhere. This means a lot of little banks are going to own unrentable square footage for a decade. I was just doing diligence on First California Bank. A small local but 3/4ths of their revenue is RE lending. They gonna hurt and their story will be replayed a thousand times. Oh, and remember the Moretech Financial Group? The giant red H1 Hummer rolling billboard is for sale. They are not just in Venutura county but branched out to Arizona in Oct of last year. Timing?
For those not subscribed to the Forums of Doom™, I present my magnus opus entitled "MadANNA and Child." (Click the link.)
The symbolism is overt, intended to represent the enabler coddling the enablee. ;-)
Edgar, when there's real pain in the economic sector there will be pressure on the government, and when there's pressure on the government there will be the search for a scapegoat. And no one makes a better scapegoat than an tan middle aged guy with a lot of money.
It doesn't matter how cozy the SEC has been with Mozilo and company, they'll offer him up as a sacrifice in a heartbeat if it helps keep furious citizens off their backs. All the cozy friendship between Ken Lay and the Bush family didn't do a lick of good in keeping him out of jail.
Of course I'd love to see some of the crooks go to jail, but at this point the schadenfruede is wearing thin. A lot of innocent people are going to suffer, and seeing crooked executives, real estate agents, and mortgage brokers go to jail is going to be cold comfort.
OMG, Joe Battipagllia on Kudlow. What next? Abbey joesph Cohen?
Mozillo has more to fear from stockholders if it is percieved that "his" $400m is the difference between survival and bankruptcy/reorg.
The gummnint is in a tough spot. They got people losing their houses but if they help them then people like me will scream that they are letting people stay in what should by rights be my houses.
when there's real pain in the economic sector there will be pressure on the government, and when there's pressure on the government there will be the search for a scapegoat. And no one makes a better scapegoat than an tan middle aged guy with a lot of money
Agreed. Corruption makes bedfellows during times of prosperity. When things go grim, the roaches scatter. And they won't for one moment hesitate to turn the tables on a former bedfellow to save their own carcass.
The Fed and the SEC have to eventually answer to the voters. Now while many of the Mozilos of the world can golden parachute into safety, a few get creamed. The government needs to ensure they give the impression that no one is above the law. To do otherwise is to incite revolt. Don't believe me? Ask Louis the 16th.
OMG, Joe Battipagllia on Kudlow. What next? Abbey joesph Cohen?
Ironically, an event similar to that was one of the primary indicators to me that things had topped and it was time to re-allocate the portfolio accordingly. That event was when I saw none other than Henry Blodget on CNBS touting his new book. Best contrarian indicator I have ever seen. That guy should be renamed "Damien".
What about ... countrywide auto pay? Would anyone advise CW mortgagees to stop bi-monthly auto withdrawls by CW?
aunt,
Do not stop the autopayment. Don't do anything that changes how your payment is taken out. Don't give them any reason to change the terms of the loan. IMO, there is no other way to go but auto withdraw.
WFB going to 8% for prime jumbo loans is huge. Their spokeswoman said the rate would be lower for those who deal directly with the bank, i.e. not brokers, but I haven't seen that rate yet. Nonetheless, WFB is pulling out of subprime lending and a jump of a point or more for prime says they are very very nervous.
PV, heh, I like that, pv...
anyhoo, is this:
Meanwhile, Securities and Exchange Commission chief Chris Cox said the SEC is coming up with new, more flexible accounting rule interpretations that companies and others could use to avoid declaring their mortgage securities in default...
the same SEC that is going to bust ballz? I don't think so. And all those innocents that will be hurt, they don't exist, except for the pension funds which are run by crooks that is.
@bj 1:34
What post of FMW are you responding to? Nothing here.
OK, I really have to head out for the night, but it's tough to tear myself away from the computer--so much happening, an avalanche of bad news, the market for MBSs in total meltdown, Cramer crying for a rate cut, and on and on.
I'll be very, very interested to read Doug Noland's take (PrudentBear.com) on this, he seems to understand the credit markets better than anyone else out there, but he hasn't updated in two weeks. Bad time to take a vacation Doug, we need the insight!
Get ready for next week, strap yourselves in, it's going to be absolutely crazy™. Remember, Serin is just the opening act for the real show . . .
@wine country dude
Try the link I provided in that section. I posted it here because the other section had gone stale. The link is that little clicky thing with the highlighted letters FMW above.
This is link that is the reference for Edgar's comment. It is the 3rd from bottom paragraph.
The Fed and the SEC have to eventually answer to the voters.
The Fed bank does not answer to anyone.
Sorry Tom.
@ BJ,
Yes, thank you for the advise. You are so right. I have a 30 year fixed and my rate is not that low. 7.25%, but I put a lot of money down.
I am gonna be still and pay a week early form now on!
@ Dawg,
Is Berkley Bank okay?
Thoughts.
Alos, must see. The Cramer melt down on National TV about the Mortgage Meltdown.
http://www.cnbc.com/id/15840232?video=452808336
PS.
@ BJ,
I always have typos, thanks for putting them on typo ignore mode.
tee hee
Hey Kidz,
It's Friday and time to play 6 Degrees of Casey Serin to Kermit the Frog. Woohoo! Loads of fun connections in this challenge!
Barclays owns my home loan, I should be okay.
Wiki:
This bank traces its roots back to 1685 in London.
Barclays (LSE: BARC, NYSE: BCS, TYO: 8642 ) is a global financial services provider operating in Europe, the United States, the Middle East, Latin America, Australia, Asia and Africa. It is a holding company that is listed in London and New York. It consists almost solely of Barclays Bank plc.
Barclays plc is the 4th largest financial services provider in the world by Tier 1 capital ($32.5 billion), and the 28th largest in the world by Market capitalization ($71.6 billion).[citation needed] It is the third largest bank in the United Kingdom based on assets.[1]
http://en.wikipedia.org/wiki/Barclays_Bank
@FMW
Watch out for homeq, they have a bad reputation for servicing fraud, you should google servicing fraud, that's where equity rich borrowers get their houses foreclosed.
I got Countrywide sold out by my local conservative bank, but I have no payment due until 3-01-08, good luck saying I paid late, however, they have missed sending me the payment coupon, and, gee lost my check.
Beware oh homeq, lots of complaints!
@ Demantoid,
Great, is that who you have now also?
I am just going to have to be perfect, what can one do?
Thanks.
@FMW,
See if you can go to automatic payments. They won't be able to mess you around as easy that way. Barclays has deep pockets, if they mess with you after that sue them for a bazillion dollars.
Guys this is just getting warmed up...
Traders have NO IDEA where they should be marking their MBS positions. Bids are non-existant in this enviornment. Institutional customers don't want to buy at levels traders will sell so very little is moving.
This is one reason why Merrill didn't pull the plug on Bear last month. Once the trade is done, the rest of the position(s) have to be re-marked. I have overheard traders pass on doing a trade because of that reasoning. Why sell at a loss AND retain the rest of the position at a lower mark when you can smile to manangement and try and ride out the storm. And I even work at a VERY conservative albeit large company.
The worst part is this is happening (to a lessor degree) in other segments of the market as well. Marks are being inflated and putting off the inevitable.
Oh no, there's nothing to see here.
http://blogs.wsj.com/economics/2007/08/02/the-2006-vintage-was-not-a-good-one/
Fuck economics. I want a decent martini!
Gentlemen,
Jackets required.
@ Edgar,
Barclays has deep pockets, YEA, IF the homeQ phone rep wasn't lying to me.
Picking this apart bit by bit and looking under the microscope at it is my new hobby.
Well except blogging and swimming of course.
From no on, I am collecting documents from them.
I will let you guys know if anything happens. good or bad.
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