Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Tuesday, March 13, 2007

What Happens When The Mortgage Lender Goes Belly Up ???....


This happens is what happens,

Subprime mortgage lender New Century Financial Corp.'s problems deepened Tuesday as the New York Stock Exchange took steps to delist its shares and the company disclosed that the Securities and Exchange Commission was conducting a preliminary inquiry into the accounting errors that inflated the value of its loan portfolio.
The company disclosed earlier this month that a federal prosecutor in California is conducting a criminal investigation into its accounting errors and trading in its securities.


most likely followed shortly by jail.

This was the most quotable statement in my opinion
Last month, New Century said it lost track of how frequently these borrowers missed payments on their mortgages. Because New Century's books didn't reflect how often borrowers defaulted and how likely borrowers were to default in the future, the value of the company's loan portfolio was overstated.

And I guess that the borrowers defaults weren't the only thing they were ignoring :
- A board member at battered subprime lender New Century Financial Corp. (NEWC.PK: Quote, Profile, Research) last month sold $2.75 million worth of stock amid a 36 percent plunge in the company's share price, U.S. regulatory filings show.

The director, Michael Sachs, said he was not aware the shares were being sold until after the February 8 transaction was completed, according to a filing with the Securities and Exchange Commission. Since then, lenders have stopped providing funding to New Century, pushing the company toward bankruptcy.


Read all about it here

Say what!!!! They LOST TRACK of how many people defaulted and were late and that one of the Directors was bailing away from that garbage scow as fast as he could. And of course for all those that thought mortgages were a great investment.

New Century's stock has plummeted 96.8 percent since a 52-week high of $51.97 last May. The stock traded last at $1.66.

Dang!

And new Century is not the only one. This whole thing may make Enron look like light fingers in the collection plate before all this is out , as the Big Banks go from chummy with borrowers and RE people to chum. I just love the way Forbes talks.

As the sharks circled beleaguered subprime lender New Century Financial Monday, speculation also swirled about which investment banks held the most exposure to the sector.

Wall Street has enthusiastically financed mortgage lenders over the latest real estate boom cycle, providing loans for companies such as New Century (nyse: NEW - news - people ) to fund new mortgages that the investment firms could buy up, package into bundles of securities and sell to yield-hungry investors. More than $1 trillion of these mortgage-backed securities were sold in the U.S. alone last year.


Read the article for the list of who's got their junk hangin' out.
It's beginning to look like a game of who's going to be left holding the fussy end of the lollipop .

So now they're getting it.
Late mortgage payments are up up up, in fact to a 3 1/2 year high according to this article

The Mortgage Bankers Association, in its quarterly snapshot of the mortgage market released Tuesday, reported that the percentage of payments that were 30 or more days past due for all loans tracked jumped to 4.95 percent in the October-to-December quarter.

That marked a sharp rise from the third-quarter's delinquency rate of 4.67 percent and was the worst showing since the spring of 2003, when the late-payment rate climbed to 4.97 percent.

The association's survey covers 43.5 million loans.

The latest snapshot of the mortgage market comes amid mounting concern on Wall Street about troubles facing subprime lenders who make loans to people with poor credit.


Sonoma Housing Bubble's been like a voice crying in the wilderness. We've had everything but the sandals and goatskin cape, but who noticed??? Certainly not the Out Of Town Investor who's building the spec house up the road from us, with a sweeping view of the valley. This sucker bought the lot recently. A private little chat with a certain birdy who knows whatof they speak says that the final construction cost will come in at upwards of 1 milllllllllliion dollars. If the investor is lucky, and seeing that they're putting their spec house up this year I wouldn't go to Vegas with them.
And then there's the other guy who's got his place around the corner up for over 2 mill, wonder how he's doing??

This is going to be a very interesting summer season housing wise. There are about 5 houses for sale alone on the street where the spec house is going up. One has been for sale for close to a year. I don't think prices will be going up. As to the spec house being built; it stands on the edge of a cliff ...in more ways than one.

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8 Comments:

At 3/13/2007 04:08:00 PM , Anonymous TS said...

Does lehman brothers still have a buy recommendation for new century? angelo mozillo had very upbeat things to say about countrywide today...the 8 million shares he sold this month were simply a way of diversifying his assets.everything is fine,don't worry ,EVERYTHING IS FINE.

 
At 3/13/2007 05:34:00 PM , Blogger Athena said...

Oh MV!!! Thank you so much for getting this up. Today Subprime Shat the bed officially and I have had no time to post a big fat We Told You So!!!! post! Thanks for being my wingman.

By the way... my first call into the office today was an announcement by those on the call about SubPrime Shatting the bed, and do we need any of the technical talent? so the word is out that the beginning of the end of the bubble is really here.

 
At 3/13/2007 05:50:00 PM , Anonymous tom stone said...

Lots going on,Alt-a is going down fast too,and say goodbye to the first time buyer.the chief enforcement officer for the office of real estate appraisal will be giving a 2 hour seminar at the petaluma sheraton on the 22nd.info at www.reaaca.org/nb.i could keep a big team busy just going to craig's list and looking for cash back deals.money for real estate loans is drying up FAST,and a hedge fund failure or ten is imminent.the carry trade is done with MBS.oh and last spring will look like boom times in 2 months.

 
At 3/13/2007 07:09:00 PM , Blogger moonvalley said...

My pleasure Athena, I had a few moments between getting this script out and dealing with the new dog.
By the by happened to hear from our old neighbor, those people he went into business with on the one spec place have now gotten him invested in another property which they intend to flip. I just don't get it, I reallly don't. I'm expecting to see these sleazoids doing the perp walk any day now when all the bad apaper and forged docs come home to roost.
And speaking of forged docs and no docs and stated loans. We were lounging in front of the Boulangerie as is our wont the other day when we happened to overhear a bunch of tourists at the next table. One of the dudes was tyalking about a house he was going to make an offer on. Actually, more like a shack but he could build ya' know? it would be sweet and he could rent the whole thing out. The RE lady showed him the place that morning and brought her dad along as a chaperone, (evidently it was waaaaaay up in the hills) they wanted 600k for the dump and then he overhearad her dad (the RE lady's) say "why didn't you tell me about this place?? I want to make an offer".
So numbnuts tourista is having squirrels trying to figure out how he can get his mitts on 600k on a Sunday, before RE ladys' dad outbids him. His friends were all remarking that they didn't know he had that kind of money. He blighly states, that he doesn't but his "guy" can work up a no down no docs, stated income for him with a cherry on top. Sheesh!

 
At 3/13/2007 11:32:00 PM , Anonymous tom stone said...

HI mv,last month maybe on the no doc,no down stated...and gotta admire a tourista who is that sharp...but doesn't he feel even a little guilty aout taking advantage of a poor realtor lady that way??? and her aged daddy too? is the tourist from hadleyburg by chance?

 
At 3/13/2007 11:42:00 PM , Blogger moonvalley said...

Tom,
hahahahaha.....what would Twain make of this boom?...Straight outta The Gilded Age.

 
At 3/14/2007 06:51:00 AM , Anonymous tom stone said...

good grief MV,you wasted your youth too? I was 16 and spent a summer on Twain,and a biography of george catlett marshall.the number of spec homes is amazing,and i expect we'll see some of the stupidest and most egregious attempts at fraud in human history in the coming months,only the greediest,and dumbest are left.I was not kidding when i said the first time buyers are gone,and the credit squeeze is going to make things very interesting indeed,and quickly.

 
At 3/14/2007 10:05:00 AM , Blogger Dr Housing Bubble said...

Athena,

Oh how quickly the tide turns doesn't it? Excellent post and summary of what is going on with the subprime implosion. Or as we will learn with time, Sesame Street style financing.

Dr. Housing Bubble

 

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