Headlines...

NEW -> Contingent Buyer Assistance Program
The Fed has new mortgage regulations...

http://news.yahoo.com/s/ap/20071218/ap_on_bi_ge/fed_mortgage_crisis_7

"In addition, the Fed is expected to propose barring lenders from paying mortgage brokers a fee that exceeds the amount the would-be borrower had agreed to in advance that the broker would receive."

Does that say what I think it means which is the Fed is thinking about limiting banks to paying a pre-determined rate which needs to be disclosed to borrowers? Surely not. Isn't that YSP is, which is as clear as mud to borrowers they are paying.
 
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20071218&id=7945375

Fed staff proposes new mortgage protections

WASHINGTON (Reuters) - "U.S. lenders would have to determine that a borrower can afford a mortgage before making the loan under a Federal Reserve staff proposal on new regulations released on Tuesday."

If this does not say it all about the credit crisis, I don't know what does. I don't know why these sorts of headlines still amaze me, but they do. It is truly amazing that we have gotten ourselves to a point so deep where it is necessary for our government to waste their time passing legislation of this nature. The fact that lenders actually need laws passed to make them take the time to determine that a borrower can afford a mortgage is unbelievable!!! What were these people thinking?! Greed, greed, greed...
 
Here in Florida the brokers have to disclose that they may be paid by the lender, tho an amount is not mentioned. This is all muddy because unless the people lock in the rates may and probably will change before closing. The Yield Spread Premium can be quite a lot for a relatively small increase in the interest rate. It's right on the closing statement, but nobody ever asks me what it is. My almost out of business brokers were rather merciful compared to others, but they still didn't want me purposefully pointing out the YSP. Specifiying an amt would be helpful, I suppose. Nobody outside the business understand the relationship between points, YSP and interest rates, and based on my feeble explanatory attempts, I think that it is basically usless to try to inform the average person of this.

However, all of it is locking the barn door after the horse has escaped.

The disclosures required are already too much. More disclosures will merely dilute the effect. Maybe, like bankruptcy, it should be required to see a credit counselor before taking out a loan!!! Not that that would work. Determined borrowers and brokers would find a way around it.
 
A very good series of articles about the Credit & Housing Crisis from Bloomberg, a new one each day.



I was reading this one with my eyes wide open, and I've been following this housing bubble since Oct 03, and

Subprime Securities Market Began as `Group of 5' Over Chinese





Daniel Sadek our local subprime impresario is interviewed and a sad history about a family caught in the credit euphoria.

`Deal With Devil' Funded Carrera Crash Before Bust

A hedge fund manager making tons of money:



Bass Shorted `God I Hope You're Wrong' Wall Street

Putting all of this together, this is good book material. I'm sure many books will be written about this in the future.
 
Mortgage-industry lawsuits

The finger of suspicion

Dec 19th 2007 | NEW YORK

From The Economist print edition

In America and elsewhere trial lawyers, state prosecutors and regulators look for the crime in subprime

http://www.economist.com/finance/displaystory.cfm?story_id=10337884
 
If anyone wants to barf, so to Economist's View. I linked in thru Calculated Risk.

There's part of an interview with Paulson. In which he says nothing in response to hard questions. He stutters as much as Bush does. I thought Paulson was intelligent, if evil. But, I suppose when people are asking you questions for which there is no sensible or hopeful answer, what else can you do but stutter and bluff?

To be fair, given what he was handed by Greenspan, what can he say? My predecessor, whom we all used to respect, royally f**ked up? And who Bush didn't fire? Gee, millions of former homeowners, some dishonest, are going to be out on the street soon, and there's really not a heckofalot what we can do about it.

Government presumes itself to be there in order to do something. And there's nothing much to be done, except perhaps to order a massive public works program for dams, bridges and roads etc, which we need anyway, so that some people's insolvency will be helped.
 
Bond giant's $8.1 billion surprise

"Just hours after dodging a potentially devastating downgrade from ratings agency S&P, bond insurance giant MBIA disclosed late Wednesday a massive $8.1 billion exposure to the same risky investments that have been wreaking havoc on Wall Street in recent months.

It's unlikely now that MBIA can escape a ratings downgrade. The news could also jeopardize an offer by buyout firm Warburg Pincus to invest $1 billion in the beleaguered company.

MBIA's surprise writedown could rattle Wall Street at a critical time. If MBIA is downgraded or fails to secure financing from Warburg Pincus, then the bonds it guarantees will be downgraded, likely resulting in more losses for investment banks and prolonged turmoil in the credit markets."

http://money.cnn.com/2007/12/20/news/companies/benner_mbia.fortune/index.htm?postversion=2007122011
 
If MBIA gets downgraded below AAA ..., I don't know what will happen. They insure munis. And I think the type of institutions which hold the munis have to divest themselves of any assets which are not insured by a AAA insurer. I don't know anyone who understands all the ramifications of this, but it 'aint good.
 
Charting the housing bubble

http://krugman.blogs.nytimes.com/2007/12/20/charting-the-housing-bubble/

This chart shows the ratio of housing prices from OFHEO to the “owners’ implicit rent” from the BLS. Both are index numbers, 1982 = 1. This is more or less equivalent to the price-earnings ratio for stocks.

The red line shows the ratio for the United States as a whole. The blue line shows the ratio for the Los Angeles metropolitan area.

la_us_price_rental.jpg
 
Another finance round-up at TOD.

At this particular moment in time, banks are about as heavily exposed to mortgages (as a total percent of assets) as they have ever been. Further, banks are holding an enormous quantity of commercial real estate loans, especially in the rah-rah areas such as Florida, the Southwest, and in California.

The FDIC reported last year that more than 50% of all the banks in the southeast and west regions had exposure to commercial real estate loans that exceeded their total capital by 300% or more. Holey smokes! ....

....To put it in the simplest of terms, the total amount of bank capital in the entire country is a little over $1.1 trillion while more than $11 trillion in real estate loans exist meaning that a 10% to 15% loss on those loans would translate into the complete bankruptcy of the US banking system. What this all means is that we have a crisis of solvency, not liquidity.
 
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