Headlines...

NEW -> Contingent Buyer Assistance Program
stepping_up said:
awgee,

I keep reading the following: Businesses are finding it difficult to raise capital as well though. Businesses borrow to invest in projects that have a greater return than the cost of borrowing. Municipalities are suffering and they need to raise money for long term projects that are investments. Students are having a hard time finding loan money to invest in their future earning power. The consensus is that credit is tight all around.
Click to expand...

IMO, many businesses, including investment banks and lenders, have been investing in paper promises, and the projection of returns were based on false premisis and assumptions and modeling. The return is not greater than the cost and now they have to pay back what they owe. Kinda like, (or just like), someone who borrows to buy a home and finds their home is worth less than what they owe. Right now the banks are still marking to model based on their hope that their paper, (home), will be worth more in the near future. I doubt that it will and I think paper assets will be worth less, or worthless. The problem is not that they cannot find money to invest in projects which will have a greater return. The problem is they owe more than they borrowed and everybody knows it and no one wants to lend to them at a rate which they have any hope of paying back. The jig is up. This is not a liquidity crisis. This is an insolvency crisis.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aK19_vvo0XqQ&refer=home
 
awgee said:
stepping_up said:
awgee,

I keep reading the following: Businesses are finding it difficult to raise capital as well though. Businesses borrow to invest in projects that have a greater return than the cost of borrowing. Municipalities are suffering and they need to raise money for long term projects that are investments. Students are having a hard time finding loan money to invest in their future earning power. The consensus is that credit is tight all around.
Click to expand...

IMO, many businesses, including investment banks and lenders, have been investing in paper promises, and the projection of returns were based on false premisis and assumptions and modeling. The return is not greater than the cost and now they have to pay back what they owe. Kinda like, (or just like), someone who borrows to buy a home and finds their home is worth less than what they owe. Right now the banks are still marking to model based on their hope that their paper, (home), will be worth more in the near future. I doubt that it will and I think paper assets will be worth less, or worthless. The problem is not that they cannot find money to invest in projects which will have a greater return. The problem is they owe more than they borrowed and everybody knows it and no one wants to lend to them at a rate which they have any hope of paying back. The jig is up. This is not a liquidity crisis. This is an insolvency crisis.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aK19_vvo0XqQ&refer=home
Click to expand...

When I was referring to business investment I meant things like projects... technology, growing capacity, etc... I assumed that was the kind of business investment that the articles were referring to. Our solution is under $100K, but I haven't had anyone so far this year tell me that they cannot proceed because they weren't able to borrow or weren't able to borrow at a reasonable rate. Are businesses having a hard time raising $1M for something that will increase their profits or reduce their costs ?
 
Sorry, I do not have any factual info on a micro level, but it would seem safe to assume that if credit is getting tight on a macro level, the same would hold true for smaller amounts.
 
morekaos said:
Now this is Comedy..." Buy one Get One Free....Houses that is "

http://www.nctimes.com/articles/2008/05/10/business/z556dff8a442c129788257444006cd63c.prt
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I remember two promotions from the last downturn which were similar. 1. Get a house in Camarillo, a Mercedes, and a golf club membership for less than the house sold the prior year. I think the price was $300k.

I also remember the buy a Cadillac, get a Hyundai free promo from a megadealer who had both.

Oh, and I remember shopping on Rodeo Drive, offering what I thought things were worth to me, and having the storeowners just say "sure". "That's a nice tie. For me it's a $35 tie." No problem, who cares if it was marked down to $80.
 
I can't believe they had the nerve to say this.

I think they are in their own little world, surrounded by yes persons,

and haven't the slightest idea what effect what they say will have.

Why is this any different from plucking a number from the air.

I will say that sometimes money is made in totally unexpected ways,

over the extremely long term.

Mad Ludwig of Bavaria was tossed out because he kept wasting the

peasons money on fabulous castles and gilded carriages. Nowaday,

the tourist flock to see them, making them cash cows.

I can't think that the money wasted on the housing funk, or the

military will have such beneficent consequences for our decendents.
 
Agreed.

But how about shame, and a bit of hunkering down.

I don't think they think they did anything wrong.

I don't think they think anything is wrong.
 
Matt Padilla has a great article out today on prime borrowers, option ARMs, and moronic understaffed loss mit departments.

Experts say no one has tracked recent trends in loss mitigation nationwide among borrowers with good credit. But a taskforce of attorneys general analyzed the number of subprime borrowers getting help from their lender.

The taskforce's original study found that as of October 2007 about 70 percent of seriously delinquent subprime loans were not in any kind of workout with the lender.

An update to the study found that as of January 2008 little had changed. The update found that while loan servicers are doing more modifications, delinquencies are rising so quickly that the ratio of those not getting help remains the same: 7 out of 10 seriously delinquent loans are not in any kind of workout.

Some borrowers with good credit say it remains difficult and confusing to get a lender to cut a deal.

Deborah Wilmoth, of Rancho Santa Margarita, is struggling with an option adjustable-rate mortgage. She has been making the minimum payment, with deferred interest adding up each month. She refinanced in February 2006, and after more than two years of making minimum payments she now owes about $43,000 more to the bank than we she started, for a total of around $400,000.

"It's getting out of hand," Wilmoth said. "I don't want my credit to go bad."

Wilmoth, 53, a project management specialist for Boeing, said she paid a $495 fee to her lender Wachoviato temporarily lower her interest rate, but her monthly payments remained the same. For one year, she won't have as much deferred interest tacked onto her debt.

Beyond that, Wachovia hasn't helped, she said. Wilmoth has taken on a second job at a youth shelter to pay her first loan with Wachovia and a second mortgage for about $100,000 with Wells Fargo, she said.

She said Wachovia didn't explain how the option ARM loan would change over time if she kept making the minimum payment.

Wilmoth also blames herself. After buying her two-bedroom condo for $216,500 in 2000, she refinanced and took out a second mortgage to remodel it.

"I am not going to say I have this finance thing under control because I don't, which is why I am in this mess," Wilmoth said.

Aimee Worsley, a Wachovia spokesperson, said her company is working with Wilmoth, but can't comment beyond that out of respect for consumer privacy.

"We want to keep all of our borrowers in their home," Worsley said. "That is always our goal."

She added that Wachovia clearly explains each loan to consumers and it has long kept option ARM loans on its balance sheet. It does not sell them to Wall Street to turn into securities. (Wachovia became a big player in option ARMs after acquiring Golden West Financial Corp.in 2006.)

"We have a large stake in being careful during the underwriting and appraisal process and in ensuring that our customers have a thorough understanding of our product and payment options," Worsley said. <--- BULLSH*T!

Wachovia's borrowers can get help even if they are current and that was true during the housing boom, she said. Current borrowers in trouble need to contact Wachovia's portfolio retention group while borrowers already delinquent should call loss mitigation, she said.

At least Ms. Wilmoth blames herself for the HELOC abuse and lack of financial understanding. Matt does a good job reporting what IR has been writing about now for some time, and it is good to see the MSM allowing Matt to put together such a great and publicly needed article.
 
Graph, your article.... Fisher, a software salesman, and his family are ensconced in a 5,000-square-foot home in Huntington Beach with a harbor for their backyard. And they pay just $2,800 a month. How? They're house-sitting while the owner tries to sell. ..... sounds like Brightwater in Huntington Beach to me !
 
Here is the transcript of the West Coast Fed president Janet Yellen's cautiously hopeful speech...

Good morning. I’m delighted to be part of the Northern California Regional Financial Planning conference this year. I’d like to thank the organizers for inviting me and for giving me an opportunity to talk about the U.S. economy and the conduct of monetary policy to such a large and knowledgeable group of professionals. Most, if not all, of you have been first-hand witnesses to one of the most significant economic shocks in our memories—one that is seriously affecting the U.S. outlook. I mean, of course, the events that have been roiling U.S. and global financial markets since midsummer of last year and that have led to the current credit crunch.

In my assessment of the economy, I will also focus on two additional factors that are shaping the outlook—the downturn in housing markets and the unanticipated surge in food, oil, and other commodity prices. These developments have taken a toll on the U.S. economy, resulting in weak growth since late last year. To preview my discussion, I expect that the economy’s performance will improve somewhat in the second half of the year. But I am also well aware that the risks surrounding my forecast are large because of uncertainty about how these three factors—the financial turmoil, the housing cycle, and commodity prices—will evolve. Before I begin, let me note, as usual, that these remarks reflect my own views and not necessarily those of my colleagues in the Federal Reserve System.

I find this to be a must read, and I hope that everyone else does too.
 
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