The Mortgage Lender Implode-O-Meter

[SHELLY]

... will we have a recession? ... will the consumer stop spending? ... will housing prices decline in '07? ... will liquidity dry up? ... is unemployment going to rise? ... will loan standards change? ... will loan problems seep into areas other than subprime? ... is the Fed's next move to raise or lower? ... what's going to happen to the US$?

I spend a lot of time trying to connect these dots. (I know, "get a life", right?)

What you should spend time pondering is WHAT is going to happen to prevent the above from happening. When you come up with an answer, I'd love to hear it.

 

[JoshMclean]

 

[SHELLY]

 

[goofer]

What you should spend time pondering is WHAT is going to happen to prevent the above from happening. When you come up with an answer, I'd love to hear it.

The obvious answer......THE FED.

 

[goofer]

... will we have a recession? ... will the consumer stop spending? ... will housing prices decline in '07? ... will liquidity dry up? ... is unemployment going to rise? ... will loan standards change? ... will loan problems seep into areas other than subprime? ... is the Fed's next move to raise or lower? ... what's going to happen to the US$?

We won't have a recession but we will have a slowing of growth ( 1-2% GDP growth). The consumer will negligibly cut back on spending. Housing prices will continue to erode. Liquidity will not dry up, the FED will make sure of that. Unemployment will remain the same. Loan standards will change and be more stringent ( I think they already have. This is the bitter and much needed medicine). The subprime loan problem WILL seep into other areas, it has to (this will cause the FED to become aggressive in lowering rates). The US$ is going lowering because of all of the above, BUT that may be the silver lining by bringing in a large new source of demand. This is all a normal occurence in the business cycle. We have gone through this before and we will go through it again.

 

[Mango]

Although I am not thrilled with site layout that bcd posted which puts the top 25 lenders, but right above it says 19 have imploded and put the closed or bk businesses below (implode o-meter)

I have a feeling the mortgage companies listed are just the tip of the iceberg. The 19 defunct cos. most likely did not sell those subprime loans directly on Wall Street, but most likely sold them in bulk transactions to the top 25. Those top 25 not only made subprime loans (BBB) but also Alt A, A- loans, as well as some of them the exotic ARM programs.

We still have yet to see how the impact of defaults to the top 25 is going to trickle down to hedge funds, pension funds, and mainly derivatives (an unregulated market :shock: (almost 400 trillion dollars) and when mortgages go bad, they may not have the financial assets to withstand such a influx of defaults.
I've been in the mortgage business 22 years and I can tell you Subprime lending has never been tested by a severe downturn in house prices and the economic cycle to this extent.

We still need to see how all this plays out IMO.

 

[hi n dry]

The Clerk of Courts lists 8 Foreclosures over the next 30 days.
Below are some of them.

http://clerkofcourts.co.walton.fl.us/default.aspx?id=31

FORECLOSURE: LOT 15 BLK H FRANGISTA BEACH 2ND ADD

FORECLOSURE: UNIT 312 AMALFI COAST RESORT CONDO

FORECLOSURE: LOT 104 DRIFTWOOD ESTATES PH 1B

FORECLOSE: UNIT 3010 CIBONEY CONDO

FORECLOSURE: LOT 2 BUENA VISTA

Would this be considered a significant number of foreclosures?

 

[goofer]

This is the time to be shopping on Wall st. for opportunity being created by the sub-prime sell off created by HSBC's revolation. The weak shall perish, the strong propsper. I have owned Citicorp for 4 years. If it goes below 50 I will add. Subprime is negligible to them looking at the big picture. I bought WAMU today at 43.20....I will add to it as it goes lower( 5% yield and a strategic acquisition target for the major banks as a kicker).
Wall ST. always over-reacts and throws the baby out with the bath water. Again, this is not new news about sub prime lenders. It has been discussed widely on this board as well as the media in general. Use this to buy great companies ( Wells Fargo, Citicorp, JP Morgan, Bank of America ) in case they sell off appreciably because investors panic and sell the blue chips along with the crap !!

 

[SHELLY]

... The subprime loan problem WILL seep into other areas, it has to (this will cause the FED to become aggressive in lowering rates).

I'm still betting that the next rate move (if there is one) will be up. The US needs all the help it can get in attracting much needed capital to keep paying off the interest on its debt. Moreover, the Fed will want to distance itself from the "easy, exotic money machine" it created that made homeOWERS out of the masses (Greenspan started the trainwreck when he touted ARMs vs Fixed as the 'way to go' just a few months before he started jacking up the rates. ). If Ben and Co. see the need to lower the rates, the U.S. will be in seriously deep do-do.

SHELLY'S ANSWER TO GOOFER'S "STRAW HAT" THEORY​

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[Mango]

This is the time to be shopping on Wall st. for opportunity being created by the sub-prime sell off created by HSBC's revolation. The weak shall perish, the strong propsper. I have owned Citicorp for 4 years. If it goes below 50 I will add. Subprime is negligible to them looking at the big picture. I bought WAMU today at 43.20....I will add to it as it goes lower( 5% yield and a strategic acquisition target for the major banks as a kicker).
Wall ST. always over-reacts and throws the baby out with the bath water. Again, this is not new news about sub prime lenders. It has been discussed widely on this board as well as the media in general. Use this to buy great companies ( Wells Fargo, Citicorp, JP Morgan, Bank of America ) in case they sell off appreciably because investors panic and sell the blue chips along with the crap !!

Goofer, I do not think the major Banks will become defunct due to subprime loans, I think that delinquincies will rise more than HSBC's "revelation"
HSBC, as well as some of the Banks like Chase and Citicorp, tried to get into a lucrative market with subprime loans and they went to play ball without a mitt. I started in the subprime market 22 years with one of the first subprime second mortgage lenders. I also was constantly recruited by the above lenders to come and show them how to enter the business years later.
IMO, the poo is going to hit the fan with much more impact than anticipated as a trickle down effect to the hedge funds, derivatives, and every other firm these Banks lent money to who played in the sandbox with them. No. its not news about subprime lending defaults, but what no one really talks about the potential trickle down effect.
I agree Wall Street overreacts, but this time I am taking the back seat, I've played in this sandbox and know what's still buried. ;-)

I'm still betting that the next rate move (if there is one) will be up. The US needs all the help it can get in attracting much needed capital to keep paying off the interest on its debt. Moreover, the Fed will want to distance itself from the "easy, exotic money machine" it created that made homeOWERS out of the masses (Greenspan started the trainwreck when he touted ARMs vs Fixed as the 'way to go' just a few months before he started jacking up the rates. ). If Ben and Co. see the need to lower the rates, the U.S. will be in seriously deep do-do.

SHELLY'S ANSWER TO GOOFER'S "STRAW HAT" THEORY​

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I agree on the rate increase and BTW- that looks like the hats they wore in that movie with Mel Gibson and the aliens.