The Mortgage Lender Implode-O-Meter

[goofer]

Listened to the interview with Lee and AAron. If they both expect inflation or hyper inflation, it seems to me that real estate is a good hedge
It is always good to listen to the contra arguement. My conclusion is they are a bit too pessemistic. Sub prime is a big problem for the marginal consumer. I do not think it is cataclysmic as some are thinking. The free market economy is ALWAYS full of excesses in certain areas, but they always work themselves out to the detriment of the ones affected or participating in those excesses. This pales (sub prime) in comparison to the oil shock of the early 70's. The economy ALWAYS muddles through. I stick with my game plan of buying the solid banks ( C, BAC, JPM, WFC, WB ) and the great growth and predictable earners like jnj pg cvx xom pep gis on any market corrections.

 

[SHELLY]

Interesting day for New Century--all lenders cut off the money and are demanding New Century buy back $8 Billion (with a "B") in junk mortgages. Stock's price got down to pocket change before NYSE closed down trading.

Like the Soup Nazi might say...."No money for you.....NEXT!"

The subprime market is pretty much toast for now (there were over $600 Billion in subprime loans written last year).

 

[bdc63]

Big day for lender implosions ... Accredited and BNC (Lehman Brothers) BOTH today.

The Implode-O-Meter is now up to 133.

They also started a HedgeFund-Imoplode-O-Meter, here:
http://hf-implode.com/

23 so far.

 

[SHELLY]

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Don't you just love these "flashback" threads?


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[bdc63]

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Don't you just love these "flashback" threads?


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I just read back over the whole thing ... I enjoyed it as well. Though, I suspect some others may not be so interested in seeing what they were thinking (and posting) a mere 5 months ago.

 

[scooterbug44]

I find them very educational!

Quick question I have (as a caveat, I know VERY little about mortgages etc):

Is the higher percentage of interest only loans in this area because there are so many lot loans & construction loans for all the new construction as compared to more standard mortgages in an area that is selling/buying homes instead of building new?

 

[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.

I just read back over the whole thing ... I enjoyed it as well. Though, I suspect some others may not be so interested in seeing what they were thinking (and posting) a mere 5 months ago.

Sounds like we almost had a crystal ball. ;-)

 

[bdc63]

I find them very educational!

Quick question I have (as a caveat, I know VERY little about mortgages etc):

Is the higher percentage of interest only loans in this area because there are so many lot loans & construction loans for all the new construction as compared to more standard mortgages in an area that is selling/buying homes instead of building new?

I suspect it is mainly the following:

1). high concentration of speculators, who are notorious for using OPM and tying up as little cash as possible

2). high cost of the area made affordability for many only possible through interest only loans (and since everyone was told "real estate only goes up" & "they aren't making any more waterfront" & "you better get in now or you will be priced out forever" ... people didn't (or didn't want to) recognize those loans as toxic waste).

 

[goofer]

It looks like Country Wide has dodged a bullet. Bank of America is making a $2 billion investment in a convertible preferred issued to them by CFC. It will give BofA a 15% equity interest in CountryWide. Both stocks traded up on the news after the close. I would buy Washington Mutual ( WM ) on this development. Bigger and better company than CFC. Citicorp ( C ) has been runored in the past as interested in buying WAMU.

 

[Sandcastle]

It looks like Country Wide has dodged a bullet. Bank of America is making a $2 billion investment in a convertible preferred issued to them by CFC. It will give BofA a 15% equity interest in CountryWide. Both stocks traded up on the news after the close. I would buy Washington Mutual ( WM ) on this development. Bigger and better company than CFC. Citicorp ( C ) has been runored in the past as interested in buying WAMU.

I bought WM and NLY on Tuesday. Both have since moved lower. I also bought C a few weeks ago ? that?s lower too. I?ll just sit on all of them, as I usually do.