Subprime Market

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Reuters
Accredited Home says survival in doubt
Thursday August 2, 12:08 pm ET

NEW YORK (Reuters) - Accredited Home Lenders Holding Co. (NasdaqGS:LEND - News), a subprime mortgage lender in the process of being sold, said on Thursday its ability to survive was in doubt, sending its shares down by about half.
In its delayed 2006 annual report filed with the U.S. Securities and Exchange Commission, Accredited said because of adverse conditions in the subprime mortgage industry, it could not give assurance that it would continue to operate as a "going concern."
Accredited shares plunged $4.01, or 48.8 percent, to $4.20 in late morning trading on the Nasdaq.
The decline put the shares well below the $15.10 level that private equity firm Lone Star agreed two months ago to pay for San Diego-based Accredited. That transaction valued Accredited at $400 million.
"It's not going to be $15.10," said Theodore Kovaleff, a senior bank and thrift analyst at Sky Capital LLC in New York. "My expectation is there will be a renegotiation of the merger, for a price much closer to the market price now."
Accredited spokesman Rick Howe did not immediately return a call seeking comment. Ed Trissel, a spokesman for Lone Star, declined to comment.
Like many rivals, Accredited has struggled with rising losses and mounting defaults among subprime borrowers, who have weaker credit histories.
 
Stick a fork in AHM they are DONE! Poor lending practices did them in and they deserve it. Bad thing is all the folks that lost their jobs and the folks that did not get the money after finding the house they wanted.
 
Union Investment Halts Redemptions From Bond Fund

By David Clarke
Aug. 3 (Bloomberg) -- Union Investment Asset Management Holding AG, Germany's third-largest mutual fund manager, halted redemptions from a fund holding subprime mortgages after clients withdrew 100 million euros ($137 million) in the past month.
The Frankfurt-based company also closed the 950 million-euro ABS-Invest Fund to new investments, spokesman Markus Temme said today. The fund, sold to institutional investors across Europe, has about 6 percent of its assets in securities related to subprime mortgage loans, Temme said.
Defaults on U.S. housing loans to subprime borrowers, those with patchy credit histories, have reached a 10-year high, driving down the value of bonds backed by mortgages and leading to losses at funds run by companies such as New York-based Bear Stearns Cos. and Oddo & Cie., a Paris-based stockbroker and money manager.
``A lot of the subprime debt lies with European managers,'' said Iain Beattie, a consultant at Watson Wyatt Worldwide Inc. in London who advises pension funds. ``There could be more news to drip out on this.''



The rest here:http://www.bloomberg.com/apps/news?pid=20601087&sid=ar2xfdz.XNPY&refer=home
 
Here's another article I found this morning-from:
http://www.mortgagenewsdaily.com/7132007_Subprime_Disaster.asp
++++++++++++++++++++++++++++++++++++++++++++



Subprime Disaster Continues To Unfold



It seems that nary a week can pass without a subprime disaster of some type. This week is no exception although there was at least a bit of variety due to bad news coming from other parts of the housing industry. Here is the rundown.

On Tuesday Moody's Investors Service announced it was downgrading its ratings on 399 bonds backed by subprime mortgages because of higher than expected delinquencies in the loans. These residential mortgage-backed securities (RMBS) were largely underwritten by loans issued in 2006 and over 60 percent of the underlying loans were sold by GE, Washington Mutual (now known as WaMu), Fremont General Corporation, and New Century Mortgage which filed for bankruptcy several months ago. Moody's said it may add another 32 bonds to the list.



At about the same time Standard & Poors (S&P) said it would probably follow suit before the end of the week, downgrading about $12 billion of subprime RMBS. Most of the S&P targets are also tied to the four lenders downgraded by Moody's although S&P is also looking at other players such as Merrill Lynch & Company.

Several analysts said that they expected the big rating services would soon start looking at those lenders that deal in so-called Alt-A mortgages which are tailored to borrowers who lack the documentation to obtain conventional or prime mortgages or may have slightly damaged credit. As we reported earlier, American Home Mortgage (AHM) one of the larger Alt-A lenders announced it was withdrawing earlier estimates of second quarter performance because of a contractual necessity to redeem many of the mortgages it had sold to investors because of elevated delinquencies. The price of stocks of Alt-A lenders such as AHM and IMPAC Mortgage Holdings fell on Wednesday and Thursday with AHM reaching the mid-$14 range from recent highs in the mid-$30s.

Rex Nutting, in a strongly worded commentary for MarketWatch accused S&P of having been among the enablers of the wildly active subprime market but said that "S&P isn't going along with the charade anymore."
Nutting predicted that a lot of subprime debt will be downgraded to junk status. "A lot of that debt will have to be sold at fire-sale prices. A lot of pension funds and hedge funds that once thrived on the high returns they could get from investing in subprime junk will now lose a lot of money." He predicted that the S&P notice that they were re-evaluating the bonds "is a death warrant for the subprime industry. No longer will mortgage brokers be able to help buyers lie their way into a home" and fewer homeowners will be able to refinance themselves out of trouble, thus extending and exacerbating housing problems.

Wow!

In related news, two major builders announced that they expected to post quarterly losses. Ryland Group and D.H. Horton both announced that heavy cancellations of home-building contracts and the necessity of opting out of agreements to buy land would cause their most recent quarterly figures to slip into the red zone. Ryland expects to book charges of $145 to $155 million and Horton said quarterly orders for new homes fell 40% from a year earlier

A smaller Ohio based builder, M/I Homes, also backed off of earlier earnings projections saying its orders for new homes and deliveries both fell in the second quarter; new contracts by 10 percent year-over-year and deliveries 24 percent to a total of 755 homes.

Another sector beginning to feel the pinch from the declining housing market is home improvement stores. Home Depot said that it is lowering its year-long profit forecast because the weakening housing market is dampening earnings more than anticipated.

HD executives said they expect adjusted earnings per share to drop 15 to 18 percent to a range of $2.30 to 2.36. Two months ago the corporation said it anticipated a drop in income of 15% but that things would pick up in the second half of the year.

The monthly forecast by the National Association of Realtors? issued on Wednesday was among the more pessimistic we have seen. It projected that new home sales will total 865,000 this year and 878,000 next year compared to 1.05 million in 2006. In more bad news for builders, the forecast projected housing starts at 1.43 million units this year and 1.44 million next. This is a substantial drop from the 1.80 million starts last year.
Lawrence Yun, NAR senior economist projected that existing home sales will pick up late this year and will total 6.11 million in 2007 and 6.37 million in 2008.

If the projections hold this would bring the 2008 figures back close to the 6.48 million sales recorded in 2006.
Existing home prices are also expected to recover, rising 1.8 percent to a median price of $222,700 next year, offsetting the 1.4 percent decline expected this year. The median new-home price should rise 2.2 percent to $245,400 in 2008 following a 2.6 percent drop this year.

Finally, Thursday the NAACP filed a class action suit against 14 of the nation's largest subprime lenders to stop these lenders from engaging in systematic, institutionalized racism in making home mortgage loans. We will have more information on this suit in the next few days.

Source:
http://www.mortgagenewsdaily.com/7132007_Subprime_Disaster.asp
 
And now... the new sub-soap opera; The Race Card. :rolleyes:

According to the lawsuit, African American homeowners who received sub-prime mortgage loans from these lenders were more than 30 percent more likely to be issued a higher rate loan than Caucasian borrowers with the same qualifications.
http://www.naacp.org/news/press/2007-07-11/index.htm

Incredible. I wonder if the "CLASS" will be able to squeeze the blood from a collapsed sub-prime turnip? :confused:
 
Just when you thought it was safe to go back into the water…….

ECB Offers Unlimited Cash as Bank Lending Costs Soar (Update3)
By Gavin Finch and Steve Rothwell

Aug. 9 (Bloomberg) -- The European Central Bank, in an unprecedented response to a sudden demand for cash from banks roiled by the subprime mortgage collapse in the U.S., loaned 94.8 billion euros ($130.2 billion) to assuage a credit crunch.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aFJrebey5MPE&refer=home

Treasuries Rise as Money Market Rates Surge, ECB Provides Funds
By Elizabeth Stanton

Aug. 9 (Bloomberg) -- Treasuries rose, led by short- maturity notes, after European money market rates surged and the European Central Bank said it would provide unlimited funds at a below-market rate of 4 percent to avert a liquidity crisis.

Investors are demanding more compensation in the form of higher yields to provide funds to non-government borrowers after losses in bonds backed by subprime mortgages. Futures traders fully priced in a quarter percentage point cut in borrowing costs by the Federal Reserve at its next meeting on Sept. 18 to assure the smooth functioning of financial markets.

http://www.bloomberg.com/apps/news?pid=20601087&sid=azrR8VsSaWEA&refer=home

BNP Paribas Freezes Funds as Loan Losses Roil Markets (Update3)
By Sebastian Boyd

Aug. 9 (Bloomberg) -- BNP Paribas SA, France's biggest bank, halted withdrawals from three investment funds because it couldn't ``fairly'' value their holdings after U.S. subprime mortgage losses roiled credit markets.
The funds had about 1.6 billion euros ($2.2 billion) of assets on Aug. 7, after declining 20 percent in less than two weeks, spokesman Jonathan Mullen said today. The bank will stop calculating a net asset value for the funds, which have about a third of their money in subprime securities rated AA or higher.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aahfnvp_J_84&refer=home

Top three headlines at Bloomberg this morning. With as shaky as investors have been of late, this may help us start another leg down to retest the lows we put in last week.
 
Interesting read from The New York Times on Sunday by Ben Stein.


"The total mortgage market in the United States is roughly $10.4 trillion. Of that, a little over 13 percent, or about $1.35 trillion, is subprime-certainly a large sum. Of this, nearly 14 percent is delinquent, meaning late in payment or in foreclosure. Of this amount, about 5 percent is actually in foreclosure, or about $67 billion. Of this amount, according to my friends in real estate, at least about half will be recovered in foreclosure. So now we are down to losses of about $33 billion to $34 billion. The rate of loss in subprime mortgages keeps climbing. In time, perhaps it will double, maybe back to $67 billion. This is a large sum by absolute standards, and I would sure like to have it in my bank account. But by the metrics of a large economy, it is nothing. The total wealth of the United States is about $70 trillion. The value of stocks listed in the United States is very roughly $15 trillion to $20 trillion. The bond market is even larger. Much more to the point, the fears and terrors about subprime mortgages have helped knock off 6.7 percent of the stock market's value in recent weeks. This amounts to about $1.1 trillion, or more than 30 times the losses so far in the subprime market. In other words, these subprime losses are wildly out of all proportion to the likely damage to the economy from subprime problems."
 
Yen Gains to Highest Since 2006 as Investors Exit Carry Trades

By Min Zeng and Kim-Mai Cutler
A monitor displays the activity of the yen


Aug. 16 (Bloomberg) -- The yen rose to the highest since July 2006 versus the dollar as a global rout of stocks and credit markets pushed investors to sell riskier assets funded by loans in Japan.
The yen is the strongest most-actively traded currency today and reached the highest since March versus the euro as the so- called carry trades unwound. Global stocks fell and companies from Australia to Canada sought emergency funds as they were unable to refinance debt. Currencies in New Zealand and Australia led the decline versus the yen, both falling more than 5 percent.
``The market is in panic mode,'' said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon in New York, the world's largest custodian bank with over $20 trillion in assets under administration. ``It is a full-blown unwinding of the carry trade. This is just the beginning.'' (more)
http://www.bloomberg.com/apps/news?pid=20601087&sid=a_U7IR0YSWuk&refer=home
 
This is a Credit Suisse article written in March 2007. It outlines the ARM resets in the coming months and years. Looking at the graph indicates that we could have further problems in subprime and alt A loans when they reset.

Mortgage Liquidity du Jour:
Underestimated No More

http://www.recharts.com/reports/CSHB031207/CSHB031207.pdf

Tightening the Housing Food Chain

In response to the recent turmoil in the mortgage market, we surveyed our
private homebuilders and their mortgage lenders to asses the new home
market’s exposure to mortgage products that are at greatest risk for tightening and increased regulation in the coming months --- it’s not just a subprime issue.

We believe that 40% of the market (share of subprime and Alt-A) is at risk of
significant fallout from tightening credit and increased regulatory scrutiny. In
particular, we believe the most pressing areas of concern should be stated
income (49% of originations), high CLTV/piggyback (39%), and interest
only/negative amortizing loans (23%). The proliferation of these exotic mortgage products has been disproportionately weighted to former hotbeds such as California, Nevada, Arizona and Florida, which have accounted for the lion share of builder profits.


Some interesting info in the report if you want to wade through the 67 pages.
 
http://www.bloomberg.com/apps/news?pid=20601109&sid=aAalytB0T5VQ&refer=exclusive

Bonuses on Wall Street Threatened by Credit Crunch (Update1)
By Jenny Strasburg and Christine Harper
Aug. 22 (Bloomberg) -- The credit-market freeze that's paralyzing leveraged buyouts, mergers and myriad computer- driven trading strategies may cut Wall Street bonuses for the first time in five years.
``There's a lot of pessimism out there,'' said Gary Goldstein, chief executive officer of executive-search firm Whitney Group in New York. ``Looking at the world today as we see it and the impact the crunch is likely to have, it looks like bonus pools will decline.''
Bonuses, the financial industry's annual rite of compensation typically calculated as a multiple of salary, probably will decline as much as 5 percent from 2006, according to Options Group, the New York-based firm that has tracked pay and hiring trends for more than a decade. While the payouts often far exceeded the average of $220,650 at the biggest U.S. securities firms last year and increased as much as 20 percent from 2005, the subprime-mortgage collapse already has drained the punch bowl.

What next…….are these guys going to have to give up their Bentleys?
 
And now....the "Decider" is weighing in.

Lord help us all.

the "Decider's " solution?
Why, cut their taxes, of course!.

http://news.yahoo.com/s/nm/20070831/bs_nm/bush_subprime_dc_7;_ylt=ApRMyothJMbABcdecAbYnFgE1vAI


Bush to outline subprime initiative
By Tabassum Zakaria and Glenn Somerville
Fri Aug 31, 3:50 AM ET


President George W. Bush will propose reforms on Friday intended to help homeowners with subprime mortgages avoid default, his first public step to address a crisis that has created turmoil in financial markets around the world.

"He will also discuss reform efforts to prevent these kinds of problems from arising in the future," a senior administration official told Reuters on condition of anonymity.

Many analysts warn that a spreading credit crisis could drag the U.S. economy into recession but the Bush administration has repeatedly said that U.S. economic fundamentals are healthy and that global growth is robust.

Financial markets in the United States and abroad have been volatile in recent weeks as U.S. defaults have risen on so-called subprime mortgages to less credit-worthy borrowers, and questions have arisen about whether loans that have been bundled into securities sold overseas may also fail.

The Federal Reserve has taken steps to increase liquidity in markets and faces calls for interest-rate cuts to head off a broader credit squeeze that could drag economic growth down.

Bush, in a statement scheduled for 11:10 a.m. EDT in the White House Rose Garden, will discuss the need for Congress to pass Federal Housing Administration reform legislation aimed at giving the agency the flexibility to help subprime mortgage borrowers, two administration officials told Reuters.

One move will be an administrative change to allow the Federal Housing Administration to guarantee loans for borrowers at least 90 days behind in mortgage payments to help them avoid foreclosure, the Wall Street Journal reported from a briefing given to a few newspapers.

The Federal Housing Administration was founded in the 1930s Depression years after the U.S. banking system failed and millions of Americans were made homeless. Now its mission is to foster home ownership by insuring mortgage loans, especially for poorer Americans who face difficulty meeting terms for conventional loans.
The risk of a credit squeeze stemming from rising defaults on subprime mortgages has fueled worry that consumers will trim spending at a rate that could tip the economy into recession.

Bush will urge the Democratic-led Congress to work with him in a bipartisan way to reform the tax code to help troubled borrowers revise their loans, administration officials said.

Bush will ask Congress to temporarily suspend a tax provision that has left some troubled homeowners with large tax bills, the Wall Street Journal reported.

Bush is also expected to direct Treasury Secretary Henry Paulson and Housing Secretary Alphonso Jackson to work on an initiative to help troubled mortgage holders obtain services and products needed to prevent default, officials said.

He will discuss the need for rigorous enforcement of predatory lending laws and strengthening lending practices, they said.

Stock prices fell on Thursday on concern that credit market upheaval was spreading, with the Dow Jones industrial average ((.DJI)) down 50.56 points to close at 13,238.73.

The rising home-mortgage default rate has been seized upon by Democrats who say the Bush administration failed to make sure that regulators enforced rules that oblige lenders to make sure that borrowers could repay their loans.

Hundreds of billions of dollars worth of the riskiest subprime loans carry low initial rates that will adjust, or "reset" at higher rates, between now and the end of 2008.

That is expected to push the default rate up and could create a potentially devastating political issue for Republicans gearing up for the 2008 elections.

Federal Reserve Chairman Ben Bernanke, who has been criticized for being too slow to take sterner measures to stamp out the smoldering credit crisis, is scheduled to speak on Friday morning about housing and monetary policy shortly before Bush's statement.
 
Tax cuts for those trying to keep up with the Jones's by spending every cent they have even before they earn it.
 
James48843 said:
And now....the "Decider" is weighing in.

Lord help us all.

the "Decider's " solution?
Why, cut their taxes, of course!.
.
Click to expand...

I know this sounds like fluff, but people are loosing there homes and then getting slapped with a tax bill on the relief of Debt they owed on the house. I think the only way out is to go into bankruptcy (insolvency) which excludes the relief of debt from income. (at least I think that’s the way it works).
 
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