Friday, March 02, 2007

SL's Water Cooler: March 2007

Post off-topic links, observations, and stories here. Please read the comment policy before posting.

Some weekend reading:

49 comments:

Patient Renter said...

Breaking news (as they say):

Fremont, (#5 lender in the country), is closing down their subprime lending business, possibly more, and the FDIC is stepping in.

Also just announced:

New Century (#3 lender in the country) will be the subject of a federal investigation regarding illegal trading and accounting.

Both company's stocks are down over 24% so far in after hours trading.

Needless to say, this is pretty significant news. Check ml-implode.com for links to articles.

Patient Renter said...

More on Fremont:

"Faced with a likely cease-and-desist from the FDIC, Fremont capitulated and shut down its residential real estate lending. All that will remain is its industrial bank subsidiary (named "Fremont Investment & Loan"). Commercial lending operations will continue. Fremont has enlisted Credit Suisse to help sell off what it can, if it can. "

Perfect Storm said...

Fremont is history.

Cheers to the death of subprime.

Patient Renter said...

Combine all of this with Countrywide's announcement that payments are late on 20% of its subprime loans. This is all happening really fast, just like a house of cards..

fishtaco said...

I wouldn't say that it is happening fast. The downward turn started in mid-to-late 2005. 1.5 years later the lenders are imploding. It is like Mr. Lereah said recently, if your mortgage is more than the house is worth and your payments are going up dramatically, why would you bother staying in the house. I guess in retrospect, it is not all that surprising. All of our collective logic and common sense, as unprofessional as it may seem to those who business it is to sell and profit from houses and debt, has proven to be accurate. All I ask is that while this implosion occurs, we keep the clichés to an absolute minimum.

Patient Renter said...

Hahaha, clichés to an absolute minimum, got it. What I meant by things happening fast is the final bad result of all of this happening fast. The build up was quite a while in the making.

Patient Renter said...

It's looking like aside from the Federal investigation that was announced, New Century will likely lack finances to continue operating:

From Marketwatch:

'If New Century's lenders do not grant the requested waivers [regarding their financing contracts], the company is likely to be forced to sell or shut down.'

Perfect Storm said...

I wouldn't say that it is happening fast.

Yeah but the end was really sudden, everybody knows these guys were on borrowed time, but the last month has been sudden.

Some idiot on Bakersfield Blog said NEW will survive. These guys will try to loan liar loans until the bitter end.

Max said...

I would add there's a great thread over on Calculated Risk on the FMT and NEW collapses:

CR Thread

This post on Mish's forum has some great insight into the NEW collapse:

Finanacial Fantasy Land

Next week is going to be busy.

Max said...

Oh, and Mish has a great summary over on his blog:

New Century Criminal Probe & Fantasy Land

anon1137 said...

Thanks for the link to the Slate article, Lander. The comparison to the tech bust is good in some ways, but as others have pointed out, it's much easier and faster (and cheaper!) to sell shares in a company than it is to sell a house. And while the demand for switches, fiber optic cables, and data servers is probably limited, babies will never go out of style.

Sippn said...

Taking it all in...

On your previous article on all zip codes dropping in price yoy ... now I see that you were looking at price per foot, as at least 6 zip codes recorded yoy median price increases.

Still not a pretty picture, but shows location does make a difference. RE is rarely a short term investment.

Also, sittin it out took issue with my Lincoln data - its still there, multi million means more than $1 mil.

Gwynster - good luck on your search. Davis (the most likely city to have your car run into by a bike) did it to itself through artificial growth limits. Can you find other unis with this opportunities in more affordable desirable cities? likely.

chuck said...

what you got here, is your basic "failure to communicate"

you gots your "living urban in sacramento", your "Sacramento Biz Journal", your "Comstocks", your "Sactown Magazine", your "Bob Shallit" types, basically all shills for either the State, People on the State Dole, or Business person who are on the State Scam...

and then you gots your, "crooks", ie Nassi, and the assorted "loan sharks", who live and breathe the "numbers" games for the Mob or similar dudes...

and now all them common folk got to "Pay the Piper" for the aboves crooked and nefarious dealings...

So what now? Just how many of them Palo Alto people you thing want to live in Roseville or Midtown?

LOL....

Sittin' Out This One said...
This comment has been removed by the author.
Sittin' Out This One said...

Sippn

I am not taking issue with your statement on the Placer County pending sales for over $1 million. In fact, I find your comments to always be interesting and astute. I just decided to examine the data on those sales.

My point is that Deutsche Bank and Countrywide each have 5,500 sq.ft. REO houses on the market that are better or equal to the four pending sales on Monteverde. The bank owned homes are priced at $859,000 & $959,000.

The four pending sales on Monteverde are all priced at $1.25 million to $1.6 million. The question I ask is why would an astute buyer pay and extra $350,000 to $700,000 for a lesser home. I believe the answer may be mortgage fraud. We will just have to see the data if and when the buyers actually close escrow.

Look at the last which house sold on Monteverde (2/5/07). It was 3216 sq. ft. and sold for $1,099,000. The seller? JTS. The lender? New Century Financial. The buyer used 100% 80/20 sub prime financing. Do you not find that strange?

The New Century funny money is no longer available now. So starting next week, a qualified, astute buyer with real cash will probably look to buy the lender owned REO homes for $800,000 and will laugh at the FB's asking $1,250,000 to $1,600,000. And those buyers are much harder to find today and will be harder to find tomorrow.

Do you understand what I am trying to say and does this make sense now? And by the way, when a sale goes thru using an artificial price pumped up by mortgage fraud, the median, the average, and the price per sq.ft., all go up artificially.

Sippn said...

Sittin

You may be right. I too see something that looks odd - the 2 by the same broker both in pending, but very plain front yards.

Now the models are also priced high, but typically they have $100s of thousands in extras installed, pools, premium lots, etc. so that doesn't surprise me.

Worth a closer look.

drwende said...

What I predict you'll see within days in the SacBee is that median prices were propped up by cash-back deals, which will be followed by a string of lawsuits against mortgage brokers and lenders.
like this

chuck said...

1. What bubble? I don't see no bubble gal darn it

2. Ain't no bubble, maybe just a slight correction, and this here's some really fine time to buy a house, why you can even get a real fine interest only mortgage which will help you out until the market turns around

3. Well maybe this is a slight correction

4. Plenty of people coming out of the Bay Area to pay those high prices to cover those REAL high prices you paid for the stucco heap in El Dorado Hills

5. Well sell you Suburban,if you must, just to cover the mortgage payments for a spell

6. Are you fertile? If so there is a really fine market for surrogate mothers, and a fine way to make some money to cover your back taxes!

7. The County is laying off? No new Building Permit Applications? and now you're staying at Loon Lake in a tent?

8. You just got laid off form Intel? and now you're gonna move back home with mom and dad in Turlock, on the chicken ranch?

9. You just shot your realtor?

10. You say you just shot your Mortgage Broker?

drwende said...

The key is to get the realtor and the mortgage broker to shoot each other.

All the fun, without the prison term!

Perfect Storm said...

From lenfer imploder meter.

Deep Thought Of The Week

Bear Stearns analysts upgraded New Century (NEW) one day before the company announced it was breaching covenants with its warehouse lenders, which was also the same day it came to light that NYSE and state criminal probes had been opened against the company for trading irregularities. Bear Stearns is itself heavily involved in mortgage lending at almost all levels. How credible does all this make Bear Stearns, I wonder? ~

All the mortgage scum baits and realtorwhores are a bunch of crooks. They are destroying the economy.

powayseller said...

Check out the trailers for Maxed out, the moview, a riveting documentary about the consumer debt trab. It won many awards, and is coming to San Francisco and LA this month. I hope they will expand their showings.

Sippn said...

Perfect Storm - doesn't that give you a lot of confidence in stock analysts? from the people that bring you the stock market - lets go there!

Perfect Storm said...

Sippin,

This Country and the World for that matter is headed for some pain. The fraud and corruption at the highest levels is going to sink us.

The stock market gurus know that milking middle America out of their 401K money is like taking candy from a baby. Even Tom Sullivan is pushing the 401K's.

I think buying stocks can be a good investment, if your portfolio is made up of good stocks, but the wallstreet brokers have middle America fooled that they know best and sinking their 401k money into crap like NEW Century.

Oh by the way I remember when Tom Sullivan was telling people not to sell when NASDAQ sank to 4000, all these people lost out when it sank to almost 1000.

The whole situiation is based on the old saying "buy low sell high" is the only investment advice that makes sense. The brokers use the 401k that is dollar averaged to minipulate the market in their favor and then buy low sell high. I bet Tom was selling at 4000, while telling people not to.

Realestate is going down the tubes especially in Rio Linda, Norwood area, Del Paso Heights, South Sac, Oak Park, Laguna, Antelope, West Sac.

drwende said...
This comment has been removed by the author.
drwende said...

Here are one financial blogger's thoughts on who'll be hurt by fall-out from the collapse of the subprime market.

Patient Renter said...

Apparently Fremont is completely shutting down their lending business, not just subprime. No officially publication of the news yet, just various insider confirmations:

http://forum.brokeroutpost.com/loans/forum/topic.asp?TOPIC_ID=99113&whichpage=5

paranoid renter said...

This letter by Warren Buffett makes for an interesting read. Here's a small excerpt.
http://tinyurl.com/2596d5

If it's good for the country, it must be good for me. :-)

>>>>>>>>>
Foreigners now earn more on their
U.S. investments than we do on our investments abroad. In effect, we’ve used up our bank account and
turned to our credit card. And, like everyone who gets in hock, the U.S. will now experience “reverse
compounding” as we pay over-increasing amounts of interest on interest.

I want to emphasize that even though our course is unwise, Americans will live better ten or
twenty years from now than they do today. Per-capita wealth will increase. But our citizens will also be forced every year to ship a significant portion of their current production abroad merely to service the cost of our huge debtor position. It won’t be pleasant to work part of each day to pay for the over-consumption 16
of your ancestors. I believe that at some point in the future U.S. workers and voters will find this annual “tribute” so onerous that there will be a severe political backlash. How that will play out in markets is impossible to predict – but to expect a “soft landing” seems like wishful thinking.
>>>>>>>>>>>

Sittin' Out This One said...

Wow! Fremont is gone. New Century is gone. And along with those two (and the rest of the sup prime lenders) go 30%-40% of the 2007 real estate sales in Sacramento. Everyone with a 2/28, 3/37 better get ready to pay their mortgage reset increases or toss the keys on the roof. Refinancing looks to be out of the question now.

Perfect Storm said...

I heard the top punk brass of Fremont were on a retreat in Hawaii when the FDIC came and shut down loan opearations. I bet the flight home was long one. Screw the crooked bastards, I hope they all go to jail.

Patient Renter said...

This is an interesting post on brokersoutpost in response to a poster named Nico who was critical of Fremont for a while:

"Nico,
You are a very smart individual. You read the news reports, read our Earnings Statements, Securitization Tables which resulted in a very accurate prediction of Fremont. I think right now there are many emotions that are flying through the mortgage business. You ask us on the Broker Outpost, "Why are Fremont Reps telling everyone that everything is fine and that we have 2 billion in reserves"? Why are the Fremont Reps blowing smoke up our @$$es? The reason that myself along with other Fremont Reps could not have opinionated about the status of Fremont Investment and Loan is because of Insider Trading policies. Fremont General is a publicly traded company. We can only release information that was approved by our Board of Directors at Corporate Level. Maybe this makes me sound like a mindless corporate robot. I am not here to interpret the law, but if it means that I don't have to worry about prosecution, then so be it. Sorry Nico for all the standard corporate answers that the Fremont Reps have been posting on the Broker Outpost. Please understand what our position was on the subject.

I only ask not to put salt in the wound. I and the rest of the world know. You were right."

Gwynster said...

Did anyone catch this?

http://www.sacbee.com/101/story/132905.html

Man torches home in Rocklin

Sippn said...

Gwynster - now I know people burn boats in the fall, but homes? I guess its tent weather...

Food for thought in light of the sucking market here. Of the 149 markets NAR collects median price data on, 73 (including SAcramento) showed decreases YOY from 2005 end to 2006 end; however, 5 showed no significant change, 71 showed gains YOY and of those 71, 14 were double didget.

Gwynster, I'd try Atlanta, with inventory normally about 90,000, not Atlantic City with appreciation of 26% last year.

Gwynster said...

I'm looking at KY, TN, NC, and western VA. Already have some phone interviews scheduled >; )

Patient Renter said...

Gwyn: I saw a post of yours on Ben's blog today that you live in a Streng home. I've been interested in Streng homes for a while. What don't you like about it?

Sippn said...

Wow a Streng - classic. My inlaws live in one. You know code and engineering has changed so much we could never build them like these again? Understand the affordability problem?

I just keep on stumbling upon "not so bad news" accidentially. On KFBK this pm news break (missing Rick Stewart) said Foreclosures.com reporting the 2nd month of declining foreclosures in Sac. Surprized me as I really expect continued high foreclosure numbers as we had most of the past 15 years (except 2002-2005).

Tommorrow, pending index from NAR....more propaganda.

Hey I'm just thinking you got to mix in both sides for credibility.

Sippn said...

Sac BJ Monday: "The county (sac) had the highest affordability rating in the state"

funny!

Gwynster said...

Yup. I have a Streng. We've handled a lot of the small stuff for the owners but it leaks like a sieve. I'd never call a Streng energy efficient and it doesn't handle heat well at all. It also has some walls that are literally pulling away from each other leaving cracks that we fill each year and repaint. The owners don't care. This is a crappy student rental to them.

Now if it were my home, I'd fix a whole lot of things. But it's not and I'm betting the owners are planning to use it as a teardown in 15 yrs - sad.

A home like mine in davis is running about 550k now. I rent it for 1000 a month - how messed up is that?

Patient Renter said...

Wow, 550k house for 1000 a month says it all. That's drastically more out of whack than my situation, and I'm still making out well.

That's too bad that the streng is having trouble. I would looove to get a decent one in a few years. We'll see how that works out.

Sippn said...

Well the Strengs I've seen were built before energy was an issue, even in Davis - so single pane glass is the energy consumer, low pitch roof needs constant care.. if not re roofed properly .. and there is none new enough for an original roof, $550k is very close to land value alone in Davis.

So why "crappy student rental", how much more does faculty rentals cost?

Patient Renter said...

http://www.1800fremont.com/Wholesale/Default.asp

"It is with deep regret that we must inform you that Fremont Investment & Loan has ceased lending activities effective Monday, March 5, 2007."

I don't know why the MSM keeps reporting that they're merely stopping "sub-prime" lending. That term is starting to annoy me.

Lander said...

I just keep on stumbling upon "not so bad news" accidentially. On KFBK this pm news break (missing Rick Stewart) said Foreclosures.com reporting the 2nd month of declining foreclosures in Sac. Surprized me as I really expect continued high foreclosure numbers as we had most of the past 15 years (except 2002-2005).

Down two months MoM or YoY? Foreclosures or preforeclosures/NODs? Sippn do you have a link? I don't usually see Foreclosures.com data for Sacramento, except last month, when the data showed that "foreclosure activity" was up in January both MoM and YoY. See SacRealStats or this spreadsheet from News10. See also Bubble Markets.

Lander said...

Sippn-
The radio spot probably was referring to the national market, not Sacramento.

Nationwide Foreclosure Filings Drop Second Straight Month

Patient Renter said...

Excellent post from Mish today. Everyone should read:

http://globaleconomicanalysis.blogspot.com/2007/03/malinvestments-predatory-lending-and.html

drwende said...

And post-2000 West Sacto construction has broken the $300k barrier on the way down today. A house lowered its price to $299,950.

What's hilarious is that they'd listed at $385k just last week (very close to Zillow's number) and this is their second reduction. It still leaves them at an out-of-the-money $260 SF, and it's 22% lower than what they'd originally wanted.

Oh -- and Zillow says they bought in 2005 for $351k. So they're so desperate to sell that they're willing to take a hit of over $50,000.

Sippn said...

Lander - thanks for straightening me out.

Jeff said...

Sippin, funny how you stumble on not so bad news but somehow you donn't stumble on bad news?? Would love to find out what RE job you really have, but it's the internet, ppl get away with saying and lying about everything. Too bad.

Sippn said...

Grasshopper, you must be new.

Did I say to sell public builders stock short a few months ago? that their writeoffs were insignificant compared to the real picture? That was simple statement anaylsis, finance 101.

I can easily find all the bad news I want, read it and figure out how I am affected.

Please back up what you say with facts.

Gwynster said...

I just love find these new homes being put up for rent to section 8 folks

http://sacramento.craigslist.org/apa/290903061.html

Patient Renter said...

"LOOKING FOR A RESPONSIBLE FAMILY TO RENT A NICE...

SECTION 8 IS OK.... "

aren't those two statements an oxymoron?