Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Thursday, February 22, 2007

Loose Lending Shock and Awe


Businessweek: "In a quarterly report that staggered analysts with the breadth of its bad news, the Kansas City (Mo.) subprime mortgage lender revealed a quarterly loss, said it may not have any taxable income through 2011, and strongly hinted its days as a real estate investment trust (REIT) are drawing to a close."

"Chris Brendler, an analyst with Stifel Nicolaus in Baltimore, called the report "alarming" and a "shock."'

"The company's news was especially unwelcome to the market, coming on Feb. 21 just as the Labor Dept. reported a 0.3% jump in core inflation, above the 0.2% increase analysts had expected. That dimmed the prospects of any interest rate cut by the Federal Reserve that could buoy the housing market."

"A subprime mortgage is one granted to borrowers with less-than-perfect credit histories because they've missed payments on credit cards, they are too young to have established a credit record, or a similar issue."

"As housing boomed in recent years, lenders rushed into making these loans, in some cases letting people borrow hundreds of thousands of dollars without ever having to prove their income or assets. Subprime lenders now represent about one-fifth of the overall $5.5 trillion U.S. mortgage market."

"Michael Simonsen, president and CEO of Altos Research, which studies California and 15 other major U.S. real estate markets, says subprime lenders' recent performance is "one of the scariest signs" for the larger housing market."

"The quick growth of subprime mortgages in the recent housing boom has been eclipsed by an equally rapid decline, with several major subprime lenders, ResMae Mortgage, Mortgage Lenders Network USA, and OwnIt Mortgage Solutions declaring bankruptcy since December. Others very well may follow."

'"The majority of the subprime business is with first-time buyers. So it may take several years to shake out," Simonsen says. "But when it comes time to sell and trade up we may find that the low end has been squeezed out." In other words, a meltdown in the subprime market could affect the supply of future buyers for years to come."

"Tightening credit standards may also ripple through the broader market. Lenders across the spectrum are rewriting their loan guidelines, checking applicants' incomes and credit histories far more diligently, and generally becoming more rigorous in the face of consumer and regulatory scrutiny. That will lead to fewer loans and less access to credit."

"On a pool of mortgages NovaStar securitized in September, 2006, more than 3% are more than 30 days past due. "If delinquencies in NovaStar's mortgages continue to rise, pullback from investors in its securities could create a liquidity crunch, limiting NovaStar's ability to originate new loans in the future," analyst Ryan Lentell wrote Feb. 9. After the latest NovaStar news, Lentell added that "liquidity remains our No. 1 concern associated with the firm."'

"In a Feb. 20 conference call with analysts, company NovaStar co-founder Hartman stressed his company's new, tighter lending guidelines and predicted future failures in the industry given the "pretty big number" that have already shut down."

10 Comments:

At 2/22/2007 03:23:00 PM , Anonymous tom stone said...

AW come on,only 5 of the top 25 have shut down so far...give it time,and we'll be down to 3 or 4,and they will be lending to people now classified as prime borrowers.The liquidity crunch has begun,and not just for subprime.BOJ just doubled their discount rate and anounced that they will continue to raise it in steps from.25% to 1.25% which will be a fivefold increase.other central banks are sure to follow,so byebye carry trade and byebye to most Jumbo loans.if our fearles leader were not guided directly by god in all his decisions i might be a tad concerned about the economy.

 
At 2/22/2007 05:46:00 PM , Blogger Lisa said...

Okay...so the majority of subprime is with first time buyers. This is the death rattle for the housing market. Without first time buyers, the chain above freezes.

I remember reading an article, think it was BizWeek, saying that in previous cycles entry level held up a little better than the trade up price points, but thought this time would be different. Prices are so disconnected from income and once the loose lending goes away, that's that.

I just love how all these folks are shocked, shocked, shocked at these developments.

 
At 2/22/2007 07:03:00 PM , Anonymous tom stone said...

well lisa,just think how shocked they will be if they find out madona isn't a virgin.most of these folks are less credible than scooter libby.

 
At 2/28/2007 06:11:00 PM , Anonymous tom stone said...

no posts in a week,has Athena eloped with Marinite?

 
At 2/28/2007 06:26:00 PM , Blogger Athena said...

nah. the day job is just taking up more than just days.

 
At 2/28/2007 07:45:00 PM , Blogger sf jack said...

athena -

Thanks for all of your work here.

It must be time consuming.

Do you have anything you can share with regard to marinite's situation?

It's certainly OK if you cannot.

Just wondering...

 
At 3/01/2007 01:32:00 AM , Anonymous Anonymous said...

I just went to Marinite's site and I am very upset.

This is feeling like the Sopranos.

I think there is so much money behind the Real Estate machine. Truth is not a good thing for them.

Marinite has always been a voice of reason and sanity.

He has provided an incredible service for those of us who won't buy in.

Hey, Marinite, I salute you!
If you continue to do the blog, I will be reading.

 
At 3/03/2007 09:09:00 PM , Blogger Marinite said...

Sorry you are upset. I still cannot believe there is some RE jihadist loser out there threatening me. (Well, Marin did produce Johnny Taliban.) But I am so damn mad. You try your best to do a service or at least share your findings and thoughts in this supposed free country of ours and what do you get as a reward? Threats. Probably some out of work Marin realtor. But yeah, there are a lot of people in Marin I guess who have bet their financial lives on property and someone comes along and says it may not be so and they get bent. I mean, just look at this graph of Marin notices of default:

http://tinyurl.com/ytaslf

Sheesh! And this is just getting started. People are going to lose their homes and it didn't have to be so.

This country is so messed up. We'd sell our own mothers for a profit. We're told by our gov and other officials and so-called experts (who more often than not have a vested interest in YOU having a particular point of view) to basically stop thinking for ourselves and just believe what we are told; we will be happier for it.

 
At 3/04/2007 12:14:00 AM , Blogger Athena said...

Hi Marinite. I can't get that link to work for me. Email it to me and I will make a real post for it.

 
At 3/12/2007 10:19:00 AM , Blogger Mr. John Doe Homeless said...

Here are the SEQUENCE OF EVENTS:

First... as you struggle against the impossibility to feel financially secure in committing to the payments needed in buying a house, before prices get out of reach, you try to accumulate enough for a down-payment to acquire somewhat affordable payments. Next, if you are fortunate enough that job security doesn’t disrupt things, or personal problems, family illness, financial stress, etc. to run interference… the rent increases always with awkward timing to set all your plans back. Can you relate to this so far... (and this is during a good case scenario). You’ll try downsizing expenses or relocating (which often adds to negative results), no longer trying to get ahead, but just trying to stay “afloat”! With these measures being mostly a temporary fix, many folks, now millions, have resorted to retreating to cars etc., (temporarily of course), and/or using a mini-storage. Of course, mini-storage is merely the first step in losing your stuff!? (of course then you have less stuff to worry about) and that’s the upside! But THEN IT GETS WORSE!

After the experiences of a lifetime, it occurred to me that the experiences of many others were mostly similar. The only variation or differences would be the cause, time, or location of the experiences one has had, or not yet had, but about to have!! The one thing we do have in common is the being ignored part, which is the first step of ignorance by those who look the other way (as though if it’s not seen, it doesn’t exist) and somehow we become less important (until we dare get in someone’s way). So... for those who have still not yet fallen to the streets, (vehicles & bushes) need to speak up... while they still may be heard or at least listened to!!

While raising public awareness to the resulting economic trends, some people (and those of you...know who you are...) have been kicking homeless folks to the curb!! It’s ironic when some have become homeless themselves, (I see them when they show up). Now they... are just another one of them! Not all of us are drug addict, alcoholic, or otherwise mentally handicapped. Some of us are used to working for a living (like those who still live in a building, and call it a home), and despite the difficulties most people should never have to deal with. While living on the streets & in bushes, or even in vehicles &/or RVs, we continue to find innovative (certainly resourceful) methods to survive in an attempt to improve our conditions.
Typically the government comes up with the wrong solutioin for a given problem. Making it a crime to try living within one's means is not only counterproductive, but is currently violating Civil Rights (8th Amendment) according to the U.S. 9th District Court. Link to the transcript and updated details at:
I am John Doe Homeless and these are my Viewpoints ***
asking for yours!

 

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