Subprime Market

[Oldcoin]

Safety first
As lenders tighten standards, borrowers go with fixed-rate mortgages
By Amy Hoak, MarketWatch
Last Update: 10:16 AM ET Jun 2, 2007


PHILADELPHIA (MarketWatch) -- Defaults in subprime mortgages have led some lenders to adopt stricter standards in approving loans, imposing more discipline on borrowers and the lending industry alike. But the biggest shift in mortgage trends has come from consumers themselves, who have been fleeing to the relative safety of fixed-rate loans over the last 15 months.

Adjustable-rate mortgages that enjoyed popularity during the housing boom aren't nearly as attractive nowadays, Doug Duncan, chief economist for the Mortgage Bankers Association, said at a conference of the National Association of Real Estate Editors this week.

http://tinyurl.com/26hsxd

Okay, when I read this it was kinda duh, but I thought it was interesting to note that there are still subprime loans out there. So, now they just require more documentation from the guy getting the loan. Could be a real tripping point for that strawberry picker!

 

[Oldcoin]

Fannie, Freddie May Enrich Shareholders in Subprime's Shakeout

By Jody Shenn and James Tyson

June 5 (Bloomberg) -- Fannie Mae and Freddie Mac, the once- derided white elephants of the mortgage market, are benefiting from the subprime lending debacle and trampling just about anything in their way.

The government-chartered companies, the biggest source of money for Americans buying houses, accounted for 46.9 percent of all mortgage bonds sold through April, newsletter Inside Mortgage Finance says. Their share rose from a record low 37.3 percent in last year's second quarter.

The biggest slump in U.S. home prices since 1991 is reviving Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac, after $11.3 billion of accounting errors led to the ousters of their chief executive officers and the threat of tighter government regulation. Now, the companies are getting praised in Congress after promising to spend at least $20 billion to keep the mortgage market afloat by purchasing loans made to people with poor credit histories or high debt burdens.

``The political tide is definitely running in their favor,'' said David Dreman, who oversees $22 billion, including 12.8 million Freddie Mac shares, at Dreman Value Management in Jersey City, New Jersey. The companies ``are re-establishing their credibility,'' he said.

http://www.bloomberg.com/apps/news?pid=20601109&sid=axfeEvVeLwww&refer=home

 

[Oldcoin]

Ohio Sues Real Estate Firms for Pressuring Appraisers (Update2)
By Brian Louis and Sharon L. Crenson

June 7 (Bloomberg) -- Ohio, the state with the third highest number of foreclosures, sued 10 real estate companies for improperly pressuring appraisers to inflate home values.

The companies, based in Ohio, California, Arizona and New York, set specific estimated values on properties and communicated a desired price to appraisers, according to the lawsuits filed by Attorney General Marc Dann today. In Ohio, it's illegal to influence an appraiser. Those sued include seven mortgage brokers, two lenders and an appraiser.

Foreclosure filings in Ohio jumped 135 percent in April from a year ago, pushing the state's rate to almost two times the national average, according to RealtyTrac Inc. States have opened investigations of mortgage brokers, lenders and appraisers as delinquencies rise across the U.S., led by subprime borrowers.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a16zEJ5yMe3Q&refer=home

I can see going after the brokers and lenders; they are the ones that can commit the bank fraud, but that poor appraiser; he must have really screwed up. From the appraisals I’ve reviewed you can generate just about any price under the sun to justify a valuation!

 

[Oldcoin]

Reuters
Stocks flat as subprime worries offset takeovers
Monday June 18, 10:26 am ET
By Kristina Cooke


NEW YORK (Reuters) - Stocks were little changed on Monday as lingering worries about the subprime mortgage market offset optimism about corporate takeovers.

Money still seems to be plentiful, and you are still seeing multiple potential acquirers for businesses," said Craig Hester, CEO of Hester Capital Management in Austin, Texas.

"But the Bear Stearns story is indicative that we have not seen the end of the problems in the subprime market and its impact on the economy and financial markets," Hester said. "I think the market will continue to be choppy."

The troubled subprime mortgage market offers risky loans to borrowers with poor credit histories.

http://biz.yahoo.com/rb/070618/markets_stocks.html?.v=8

 

[Oldcoin]

Bear Stearns Fund Collapse Sends Shock Through CDOs (Update2)

By Mark Pittman

June 21 (Bloomberg) -- Merrill Lynch & Co.'s threat to sell $800 million of mortgage securities seized from Bear Stearns Cos. hedge funds is sending shudders across Wall Street.

A sale would give banks, brokerages and investors the one thing they want to avoid: a real price on the bonds in the fund that could serve as a benchmark. The securities are known as collateralized debt obligations, which exceed $1 trillion and comprise the fastest-growing part of the bond market.

Because there is little trading in the securities, prices may not reflect the highest rate of mortgage delinquencies in 13 years. An auction that confirms concerns that CDOs are overvalued may spark a chain reaction of writedowns that causes billions of dollars in losses for everyone from hedge funds to pension funds to foreign banks. Bear Stearns, the second-biggest mortgage bond underwriter, also is the biggest broker to hedge funds.

``More than a Bear Stearns issue, it's an industry issue,'' said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. Hintz was chief financial officer of Lehman Brothers Holdings Inc., the largest mortgage underwriter, for three years before becoming an analyst in 2001. ``How many other hedge funds are holding similar, illiquid, esoteric securities? What are their true prices? What will happen if more blow up?''

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a7LCp2Acv2aw

 

[robo]

BEING STREET SMART

By Sy Harding

WHAT'S UNDER THAT ROCK? June 22, 2007.

Merrill Lynch tugged at the corner of a rock this week and it looked like something began to crawl out. They immediately dropped the rock back in place, with help from J.P. Morgan, Blackstone Group, and Bear Stearns.

Of course, I'm talking about how close two hedge funds operated by Bear Stearns came to going belly-up this week, and what was revealed in their skate to the edge.

The largest of the funds was launched ten-months ago, after taking in $600 million of investors' money. As most hedge funds do, the fund then leveraged that capital ten to one by borrowing $6 billion from major institutions including Barclays Bank, J.P. Morgan, and Merrill Lynch. The fund then invested heavily, as have many hedge funds, in collateralized debt obligations, or CDOs.

http://www.decisionpoint.com/TAC/HARDING.html

 

[robo]

Friday, June 22, 2007
Black(stone) Friday! Oh Oh, Credit Markets Come Home To Roost!

Let's dispense with the silly first - BX (Blackstone) looks to be opening up in the $37 range. That's not awful, but its hardly the huge pop that people were talking about with the oversubscription ratio.

The Dow, S&P and Nasdaq all opened up moderately down. The 10 is up again, opening up 0.7%, which puts us back in the groove on interest rates - going higher. The markets are doing the "inverse of the 10" deal again this morning; the charts on my 9-pane are interesting; near perfect inverses for the first few minutes, but then they appear to have decoupled a bit. It will be interesting to see how this plays out over the remainder of the day - my guess is that the "Blackstone fever" has infested traders - at least for a while. Certainly, its all CNBS was talking about for the first half-hour!

As I noted last night, we got the Hindenburg Omen confirmation. Asian markets were down last night; I wonder how much of that was people paying attention and how much was just plain old-fashioned exhaustion.

It looks like the market is starting to consider risk once again:


"June 22 (Bloomberg) -- U.S. stocks fell on concern hedge- fund losses at Bear Stearns Cos. may signal wider problems in credit markets.

Bear Stearns, the second-biggest U.S. underwriter of mortgage bonds, dropped after people with knowledge of the company's proposal said it plans to take on $3.2 billion of loans to stave off the collapse of a hedge fund. Citigroup Inc., JPMorgan Chase & Co. and Moody's Corp. also declined. "

No, you think?

$3.2 billion? For guys that had $6b in leverage out against $600m in collateral?

So what's the truth here guys? The claim was that they lost "20%"? Really? Or was it 50%? Or was the leverage ratio more like 25:1, not 10:1?

And better - why do you flush $3.2 billion down the toilet if you're Bear Stearns? There is only one reason to do that - you're afraid of the explosion that will result if you don't do it - that is, the blast will be even bigger in its impact on your bottom line.

CNBC is also reporting that Cantor Fitzgerald is getting bids as low as ten cents on the dollar for some of the CDOs they're trying to sell! That's a ninety percent haircut!

There are a lot of liars out here on the street right now, and sooner or later, they're going to have to fess up. If the real loss was 50%, that's horrendous. It also tells you a lot about the exposure on the street to this issue and points out the fact that there is absolutely no way that this will be, or can be, contained. It simply doesn't matter whether people want it to be or not - there is some $2-3 trillion in losses out there that are being hidden under the carpet at the present time!

This can and WILL come out, and if I'm right about the magnitude of this "crash" isn't the right word for what's coming. More like catastrophe. This pile of paper is what supports the consumer credit markets! If it implodes, and it looks like that's exactly what's happening, the damage, given the leverage being employed, will be tremendous.

http://market-ticker.denninger.net/

 

[robo]

Bob Brinker is talking about the Subprime problem on his show right now. Plenty of problems ahead, but he commented the Fed should cut rates next week to help us out of this mess. However, he does not think they will. He commented no end in sight for this housing problem. No one knows for sure how bad it really is. Getting lots of callers, it should be a interesting day in the Subprime Market talk. Bob thinks it's much uglier then most think and wall street knows it. Other wise you would see more stepping up to buy these notes. Not many buyers.

Oh BOY!

This will put pressure on stocks thru the summer in my opinion. Bad news is now bad news in the stock market and the risk reward level is getting higher. The Bulls and CNBC will spin it next week, dont worry be happy and buy stocks. They are cheap.

Robo

 

[tsptalk]

Bob Brinker is talking about the Subprime problem on his show right now. Plenty of problems ahead...

All this going on and all 4 of Fox's Saturday bulls and bears type shows this weekend were talking about Israel using models to attract tourism, Bloomberg running for president, illegal immigration taking away jobs, and paying inner city people $50 to sign up for a library card.

Sheesh! All I wanted was info on the market from "the experts."

 

[robo]

All this going on and all 4 of Fox's Saturday bulls and bears type shows this weekend were talking about Israel using models to attract tourism, Bloomberg running for president, illegal immigration taking away jobs, and paying inner city people $50 to sign up for a library card.

Sheesh! All I wanted was info on the market from "the experts."

Tom,

That two hour block is terrible. At one time it was pretty good, but now very bad. Same old guests arguing about things the show host picks. Fox needs to fire the whole bunch and have one quality hour program.

Bring back the shows like Louis Rukeyser had.

http://www.imdb.com/title/tt0255766/news

I never leave the volume on CNBC much any more. I have several good Blog sites I read daily and TSP talk is on my list. To much Bull out their.


That is why I like systems like Trader Fred is using. No spin from the CNBC talking heads. I'll stick with TA work and the trend.

I get money talk on demand and enjoy the special guest Bob Brinker has on weekly. They talk about investments and many other economic subjects and problems that could affect the stock market..

They have an expert on right now talking about Washington, China, and what to do about China's currency. This should be good.

China and Japan are currency manipulators for sure. Lets see what the expert has to say about it.

Look for Chinese dollars to start buying more stock and fewer Bonds in the near future. Black Stone is just the beginning.



The final thoughts on Subprime is more too come!

 

[nnuut]

May be a rough week, some think it will be an UP week, looks tight to me!

Wall Street awaits Fed's rate decision this week

After weeks of market turbulence, investors look for clues

Updated: 2 hours, 44 minutes ago
NEW YORK - After weeks of stock market turbulence caused by soaring bond yields, Wall Street will now be able to gauge the chance of an interest rate hike straight from the source: the Federal Reserve.

On Wednesday and Thursday, the central bank’s Federal Open Market Committee meets to discuss interest rates. The Fed is widely expected to keep the benchmark rate steady at 5.25 percent, as it has done since last summer, but the policy statement it releases Thursday will be parsed for clues about future moves.
For months, policy makers have stated they expect the economy to recover, and that curbing costs is their primary concern in light of uncomfortably high inflation. Any change in that stance could rile the stock market.

Other data that could help investors decide whether inflation is rising at a worrisome pace is the Commerce Department’s Friday report on personal income and spending, which includes a reading on core personal consumption expenditures — or core PCE inflation. The year-over-year PCE figure is the Fed’s preferred inflation gauge, and is expected to have risen to 2.1 percent in May from 2.0 percent in April, according to the median estimate of economists surveyed Friday by Thomson Financial.​

Personal income is expected to have risen 0.6 percent in May, up from a decline of 0.1 percent in April, and spending is expected to have increased 0.6 percent, slightly higher than the 0.5 percent rise in April.

Major indexes fell last week, with the Dow Jones industrials down 2.1 percent, the Standard & Poor’s 500 index down 2 percent and the Nasdaq composite index off 1.4 percent.
A heavy week for economic data

On Monday, the National Association of Realtors reports on existing home sales. The market expects the data to show a rise of 5.97 million in May, a similar increase to April’s 5.99 million.

Tuesday, the Conference Board issues its June consumer confidence index. The market predicts the index will slip to 105.3 from 108.0 in May.
Also Tuesday, the Commerce Department releases data on new home sales, which analysts expect to have gained by 920,000 units in May, slightly less than April’s rise of 981,000.

The Commerce Department reports Wednesday on orders of durable goods. Analysts predict that May durable goods will have fallen 1.0 percent after rising 0.8 percent in April.

On Thursday, the Commerce Department releases its final reading on first-quarter gross domestic product, which the market expects to come in at 0.6 percent, the same as the estimate made in May.

In addition to the personal spending data on Friday, investors will be watching for the Chicago Purchasing Managers’ index, a precursor to the Institute for Supply Management’s manufacturing index. The market forecasts a decline in the June index to 58.0 from 61.7 in May.
Also Friday, the University of Michigan releases its revised June sentiment index, which is expected to show a slight uptick.

The pace of earnings starts to pick up
On Tuesday, Lennar Corp. and Oracle Corp. release their quarterly results.
Analysts forecast Lennar’s second-quarter profit to come in at 8 cents a share. The homebuilder’s stock closed at $39.73 last Friday, at the low end of its 52-week range of $38.66 to $56.54.
Oracle is expected to post a fourth-quarter profit of 35 cents a share. The software company closed at $19.39 last Friday, at the high end of its 52-week range of $14.22 to $19.96.
On Wednesday, Bed Bath & Beyond Inc., which issued a profit warning earlier this month, reports its fiscal first-quarter results Wednesday. Profit is expected to come in at 37 cents a share. The stock closed last Friday at $37.14, in the middle of its 52-week range of $30.92 to $43.32.
General Mills Inc., Palm Inc. and Research in Motion Ltd. report on Thursday.
General Mills is expected to show fourth-quarter profit of 63 cents a share. The stock closed at $58.46 last Friday, in the top end of its 52-week range of $51.34 to $61.52.
Analysts anticipate Palm will post fourth-quarter profit of 15 cents a share. The stock closed at $16.80 last Friday, in the middle of its 52-week range of $13.51 to $19.50.
The market expects Research in Motion to report a second-quarter profit of $1.05 a share. The stock closed at $170.65 last Friday, near the upper end of its 52-week range of $62.12 to $177.42.
http://www.msnbc.msn.com/id/19376990/

 

[rokid]

PIMCO's Bill Gross Weighs in on the Impact of Subprimes

Bill Gross doesn't think the sub-prime crisis is over. He sees the resets coming due in 2007-2008 and the empty homes outside of Chicago, Las Vegas, and in Miami as a potentially big problem for the economy, i.e. negative impact on growth and short term yields.

http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2007/IO+July+2007.htm

 

[Birchtree]

As long as the sub-prime crises continues it will keep the speculators buried under their flip properties. When they finally dig out - guess where they'll head to spend their money? We don't want these folks in this market, at least not yet anyway. They can join the party at Dow 17,000 when I'll start getting out. Watch for classic signs. Keep'em thinking the Fed will increase rates - oh the pain will be envious. I'm such a renegade contrarian finding joy in all this pain.

 

[robo]

Banks 'set to call in a swathe of loans'
By Ambrose Evans-Pritchard
Last Updated: 7:25am BST 26/06/2007



The United States faces a severe credit crunch as mounting losses on risky forms of debt catch up with the banks and force them to curb lending and call in existing loans, according to a report by Lombard Street Research.


Bear Stearns headquarters in New York


The group said the fast-moving crisis at two Bear Stearns hedge funds had exposed the underlying rot in the US sub-prime mortgage market, and the vast nexus of collateralised debt obligations known as CDOs.

"Excess liquidity in the global system will be slashed," it said. "Banks' capital is about to be decimated, which will require calling in a swathe of loans. This is going to aggravate the US hard landing."

Charles Dumas, the group's global strategist, said the failed auction of assets seized from one of the Bear Stearns funds by Merrill Lynch had revealed the dark secret of the CDO debt market. The sale had to be called off after buyers took just $200m of the $850m mix.

"The banks were not prepared to bid over 85pc of face value for CDOs rated "A" or better," he said.

"God knows how low the price would have dropped if they had kept on going. We hear buyers were lobbing bids at just 30pc.

"We don't know what the value of this debt is because the investment banks shut down the market in a cover-up so that nobody would know. There is $750bn of dubious paper out there in the form of CDOs held by banks that have a total capitalisation of $850bn."

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/06/26/cnusecon126.xml

 

[350zCommTech]

Subprime shakeout claims another fund
Caliber Global, which controlled almost $1 bln in assets, to shut down

SAN FRANCISCO (MarketWatch) -- Caliber Global Investment Ltd., a London-listed fund that controlled almost $1 billion of mortgage assets, said on Thursday that it's shutting down after turmoil in the subprime market cut demand for its shares.

Caliber, run by Cambridge Place Investment Management, plans to sell all of its assets over the next 12 months and return as much money as possible to shareholders, the fund said in a statement. The plan needs to be approved by investors at an extraordinary meeting in August, Caliber added.

The rest:http://www.marketwatch.com/News/Sto...-B2E6-423A-89C1-E4F1B19AA164}&dist=RNPullDown

 

[wht00ss]

Another look

Most of the foreclosures happening are with prime borrowers, which is a much bigger chunk of the mortgage market. Prime borrowers are also affected by ARM resets over the next few years and falling home prices. This also means that delinquencies are rising among prime borrowers and that means their credit will be damaged. They may have to re-finance at a higher sub-prime rate. This creates a whole new market for subprime loans right at a time where most of the sub-prime lenders have gone away.

In addition, if interest rates continue to rise, aside from the subprime market benefitting from the wider interest rate spread, it will cause less people to qualify for prime mortgages and further expand the subprime market. My Lord, what a perfect storm for well positioned subprime companies which have been crushed recently to grab market share!

 

[weatherweenie]

Subprime lending: Business as usual
Wednesday June 27, 4:27 pm ET
By Les Christie, CNNMoney.com staff writer

It would appear that subprime lenders have yet to learn from their mistakes. According to a consumer advocate group, abuses persist industry wide, despite the recent subprime mortgage meltdown. At a Senate subcommittee hearing on ending mortgage abuse this week, the Center for Responsible Lending (CRL) presented its findings on subprime loans included in 10 recent packages of mortgage backed securities.

http://biz.yahoo.com/cnnm/070627/062707_subprime_abuses_may_persist.html?.v=2&.pf=loans

 

[350zCommTech]

I think we're going to be seeing more of this. I think it explains last weeks' afternoon sell-offs.

United Capital suspends redemptions on Horizon hedge funds

By Alistair Barr
Last Update: 1:04 PM ET Jul 3, 2007


SAN FRANCISCO (MarketWatch) -- United Capital Markets, a leading broker in the asset-backed securities market, said on Tuesday that it suspended investor redemptions on four of its Horizon hedge funds after suffering losses. United Capital said the redemption halts for the Horizon Fund L.P., Horizon ABS Fund L.P., Horizon ABS Fund Ltd. and Horizon ABS Master Fund Ltd. funds are temporary and it does not plan to liquidate them. Credit spreads have widened dramatically across asset-backed securities, mortgage-backed securities and collateralized debt obligations as news broke about significant losses in a large hedge fund focused on the space, United Capital explained. The Horizon funds have cut their leverage and sold "a large amount" of cash securities in the market. United Capital said it has also stopped trading in the synthetic structured finance markets completely because they are "highly volatile." The Horizon funds had $145 million in cash as of July 3 and United Capital is working to satisfy redemption requests quickly. Trading losses and market repricing will leave the funds down in June and for the year, United Capital added.

http://www.marketwatch.com/news/story/united-capital-suspends-redemptions-horizon/story.aspx?guid=%7B6DDCCACA-7CAA-47D2-AE96-D9DC5B8E109A%7D

 

[350zCommTech]

Subprime contagion?

Ohio's attorney general is investigating the role that credit-rating agencies like Moody's played in rubberstamping dicey bonds, report Fortune's Katie Benner and Adam Lashinsky.


By Katie Benner and Adam Lashinsky, Fortune
July 5 2007: 11:16 AM EDT

(Fortune Magazine) -- While Bear Stearns is the most recent financial institution to find itself caught up in the subprime-mortgage quagmire, the three credit-rating agencies - Standard & Poor's, Moody's (Charts), and Fitch - may be the next ones to see their good names dragged through the mud.
The reason? Ohio attorney general Marc Dann is building a case against them based on the role he believes their ratings played in the marketing of risky mortgage-related securities.

"The ratings agencies cashed a check every time one of these subprime pools was created and an offering was made," Dann told Fortune, referring to the way the bond issuers paid to get their asset-backed securities (ABSs) and collateralized debt obligations (CDOs) rated by the agencies. These ratings run from AAA for debt with the lowest risk of default all the way down to noninvestment- grade bonds, which many pension funds are prohibited from purchasing in their charters. "[The agencies] continued to rate these things AAA . [So they are] among the people who aided and abetted this continuing fraud," adds Dann.
Ohio has the third-largest group of public pensions in the United States, and they've got exposure: The Ohio Police & Fire Pension Fund has nearly 7 percent of its portfolio in mortgage- and asset-backed obligations.
Moody's says that Dann's accusations are nonsense. "We perform a very significant but extremely limited role in the credit markets. We issue reasoned, forward-looking opinions about credit risk," says Fran Laserson, vice president of corporate communications at Moody's. "Our opinions are objective and not tied to any recommendations to buy and sell." She further points out that while some securities have lost significant value, none have actually defaulted. (S&P and Fitch declined to comment.)

Read the rest here:http://money.cnn.com/2007/07/05/news/economy/subprime.fortune/index.htm

It's about time! Remember all the headlines about $40-50M Christmas bonuses??

 

[Birchtree]

It's all enough to make a grown bull cry with joy - bring'em down.