Headlines...

NEW -> Contingent Buyer Assistance Program
crucialtaunt,

I bet that program will come back to bight them later. I suspect most people will max out their credit cards before going into foreclosure and bankruptcy. I think this may magnify the losses of some of these credit card companies.
 
174 Vintage 92620 sold at the auction today. The NOS amount was $740k, the opening bid was $680,002.63 and sold for $680,002.64. The bank walked away from $186k just from the remaining balances on the 1st and 2nd not to mention any fees or interest they had to pay back. Ouch and is it any wonder why Fremont was told by the FDIC to stop originating loans?

NODs are up so far this month compared to last month..
 
From Herb Greenberg's blog at www.marketwatch.com

Builders Laugh at Paulson?

Recent comments by Treasury Secretary Hank Paulson that the housing slump is largely contained apparently didn't get lost on builders. As the story goes, CSFB analyst Ivy Zelman told her company's sales force today that builders attending the Builder 100 Conference in San Diego laughed when the comments were mentioned as if Paulson didn't know what he was talking about. How did I hear? From a legitimate and well-regarded trader who heard it directly from his Credit Suisse broker after Zelman reportedly broadcast the story on the Credit Suisse Squawk Box. Zelman hasn't returned my call.

I wonder if the the CEO of DRHorton said the same thing about the market as he would for Paulson? "This Paulson guy is going to suck."
 
Home Prices and Sales Fell in April

http://www.nytimes.com/2007/05/26/business/26econ-web.html?ex=1337832000&en=47689c4082b75cd7&ei=5088&partner=rssnyt&emc=rss

By JEREMY W. PETERS

Published: May 26 (WTH), 2007

The National Association of Realtors said today that the annual sales rate for existing homes fell 2.6 percent, to 6 million, which was the slowest pace in almost four years. At the same time, inventories grew to an 8.4-month supply — the largest in 15 years — and the median price of an existing home fell 0.8 percent, to $220,900.

“The market is lousy,”
 
http://www.larouchepub.com/pr/2007/070522warn_bernanke.html

I read a report from John Burns that they produced at the same time a year ago for the builder I worked for and even with their bearish tone they were off on many economic data points. They produced a good report but they were much too optimistic at the time on key factors that are now showing signs of weakness. These guys are good but a little late to the non-koolaid drinking party. I think the builders will consider this when they renew their contracts with John Burns.
 
LA Times article on the bad practices of lending and how confusing the products are. No matter how thick the disclosures are or what the lender says, I am still going to put the blame on the FB who signed and agreed to the loan. The couple highlighted in this article is worse than the rest because the guy is a freaking vascular specialist. I would hope a heart doc would understand basic finance but he clearly doesnt and wants to blame the lender...

http://www.latimes.com/business/la-fi-loans27may27,1,5312955.story?coll=la-headlines-business

'Option' ARMs can easily confuse

For Los Angeles newlyweds Joseph and Jamie Horton, the deal looked too good to pass up: a mortgage with an initial 1.75% interest rate and payments that wouldn't adjust for five years. The Hortons figured that with all the money they would save on interest payments, they would be able to pay down a significant chunk of the principal on their loan. So they signed on the dotted line. But after a month, the actual interest rate on their "option" ARM shot above 8%. They blithely made the minimum payment each month, not realizing, they say, that the low rate they had secured was so fleeting. Within months, thousands of dollars in unpaid interest was added to their loan balance. Ready to bail out, they discovered a second catch: a prepayment penalty that would cost them $18,000 if they refinanced. "They held a carrot in front of us and told us that this was a great deal," said Joseph, 32, a vascular specialist who has since refinanced into a fixed-rate loan. "In one year, it cost us $83,000. It was just excruciating."
 
http://tinyurl.com/yp7reo

Khov's awful numbers and if you are an ubernerd and read the 10-Qs you will see they went from having $34.4 million in October 2006 to $10 million in April. CEO Ara Hovnanian said that the housing has continued to slip further. Well maybe if you didn't build small ugly one bedroom apartments on a busy street in Irvine for $600k you wouldn't as many problems.

These guys are likey to be toast or bought out. In 2005 I knew they were going to be one of the builders that suffered the most because they were buying smaller builders up until then at inflated prices. Ara and Mozillo make a great pair with their mafia suits.
 
You have to wonder, well, I guess you don't have to wonder if you don't want to think about it, but what will be the effects of up to $450 trillion worth of derivative contracts value being adjusted down? What will earnings statements look like? Pension fund balance sheets? Insurance companies? Do people think that the government or the Federal Reserve will somehow save the day? Do people think that it won't effect them because they aren't invested in any CDOs or CDSs or ... ?

I don't know what the ramifications of a derivative meltdown would be, but I would guess the liquidity propping the stock market, mortgage markets, bond markets, etc. will vanish. I realize this sounds quite doomsdayish, but the amounts involved are staggering. The amounts which have already been lost and unaccounted for are unknown.

I keep reading that at times in financial history, when the smart money thinks they have reduced risk in a market place, that risk has not been reduced, but just hidden, accumulated, and surpressed. And when that surpressed risk asserts itself ... ? Can you say LTCM? Multiplied by a factor of 100?

Oh well.
 
awgee - I think what is interesting is all the lenders IMPAC, Novastar, Countrywide and IndyMac all show gains or losses on their derivative investments but if they show a loss they shrug it off as it is just paper money. First how do we know what the real loss or gain is when there is no real market for these derivatives? Or am I missing something here and should ask Tanta over at CalculatedRisk about this? I think I might, actually after I type this I will. Second what happens when the derivatives market no longer has a market won't those losses actually become real? Third if they don't become real how long can a lender wait before the market comes back?

When Warren Buffett speaks about derivatives and says that it has gone to far with no market you listen. One of the smartest investors is worried I think it is time to worry.

awgee - Have you read Liars Poker by Michael Lewis? I haven't started it yet but it is about the creation of secondary market for bond packaging. One of the characters in the book is Lewis Ranieri who is the main person behind packaging mortgages into bonds MBS.
 
Lansner now has competition from Mickadeit writing about how the probate auctions are not even selling.

A word of caution we are at an approximate 942 NODs for 20 of the business days in May as compared to 821 NODs for 20 business days in April. We have one extra business day in May compared to April with only two more before I have the approximate total. It is possible that we could hit 1000 for the month of May but don't get too excited because I could be off by 50 or so. But I do know we will have more in May than April.
 
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