[Eli]

Cynical I am not sure that is why at all. Freddie Mac and Fannie Mae are a separate issues from the sub prime lenders. Although Freddie Mac and Fannie MAe have bought a lot of subprime loans.

I think where they are getting into trouble is with their sales of derivatives which as whole seems like a scam.

These subprime lenders are not government backed but they are backed by the larger bank.

This thing is still set to come undone. In places like The peoples Republic of California where a shit box in a sketchy neighborhood can set you back half a mil it will come a part.

The banks now own lots of houses because of the bad loans they made that will dilute the housing market. People who had good credit and who are forced to downsize are going to get hurt even if their home loses 10% of it's value. Just to walk away it might cost them 50,000. Nope a downward spiral I am afraid, too many people serving the god money, now he is going to nail them up against the wall.

[cynicalheretic]

$this->bbcode_second_pass_quote('Eli', 'C')ynical I am not sure that is why at all. Freddie Mac and Fannie Mae are a separate issues from the sub prime lenders. Although Freddie Mac and Fannie MAe have bought a lot of subprime loans.

I think where they are getting into trouble is with their sales of derivatives which as whole seems like a scam.

These subprime lenders are not government backed but they are backed by the larger bank.

This thing is still set to come undone. In places like The peoples Republic of California where a shit box in a sketchy neighborhood can set you back half a mil it will come a part.

The banks now own lots of houses because of the bad loans they made that will dilute the housing market. People who had good credit and who are forced to downsize are going to get hurt even if their home loses 10% of it's value. Just to walk away it might cost them 50,000. Nope a downward spiral I am afraid, too many people serving the god money, now he is going to nail them up against the wall.

[seahorse2]

Goldman Sachs and Lehman Brothers (mortgage brokers) would suffer most from a if subprime loan crisis becomes a credit crisis.

Bloomberg

[TommyJefferson]

$this->bbcode_second_pass_quote('seahorse2', 'G')oldman Sachs and Lehman Brothers (mortgage brokers) would suffer most

[I_Like_Plants]

Ahh, the cartoon that refuses to die....

I like how the rat is turning away from Bob in the last panel, like ewwwww.....

[Eli]

Yeah Tommy I hear you.

New Century Financial is one of the big subprime lenders and they are currently under criminal investigation, the stock went down like a rock the other day.

The big banks who backed the loans these guys sold will not let them fail they will refinance them and then cook the books to hide the loses.

The Fed will not do anything about it just like they dropped the criminal investigation of Fannie Mae and Freddy Mac. The Fed just wants the appearance of due diligence. They are not going to let the Goldman Sachs and Lehman Brothers suffer.

And here is where my new ultra doomer theory comes in. The Fed is going to do everything to limit the housing bust. They will print funny money like mad to give to the banks to buy back and prop up their own subprime lackeys. This desperate effort to keep the economic engine running will back fire.

The US market will love it and the CNBC stooges will be screaming about how you can't underestimate capitalism. The problem will be that China and other major backers of US debt will realize they have to make serious moves to limit their exposure to the shell game and that pull back is going to bring the whole system crashing down.

[MacG]

$this->bbcode_second_pass_quote('Eli', 'T')his desperate effort to keep the economic engine running will back fire.

[DantesPeak]

New Century gets margin calls, and can't come up with the money, per SEC filing:

$this->bbcode_second_pass_quote('', 'P')roduction and Financing Update

One of the Companys lenders has extended to the Company $265 million in financing secured by the Companys REIT mortgage loan portfolio and certain residual assets. The net proceeds from the financing will be used to refinance and/or satisfy some of the Companys existing obligations. This lender has also
provided financing to the Company to refinance the remaining balance of approximately $710 million in mortgage loans currently financed through another lending facility. This refinancing was undertaken in response to that lenders notice to the Company exercising its rights to effect a repurchase by the Company of the loans and other assets it had financed for the Company.
Furthermore, the Company is in discussions with lenders and other third parties regarding a refinancing and other alternatives to obtain additional liquidity. No assurance can be given that any of these discussions will be successful.
The Company has not yet obtained waivers of the net income covenant from its remaining five financing arrangements since filing the Form 12b−25 on March 2, 2007. In addition, the Company has received an aggregate of approximately $150 million of margin calls, approximately $80 million of which has been satisfied.
The Company has approximately $70 million in outstanding margin calls from five lenders.
The Company has only been able to fund a portion of its loans this week. In addition, its capacity to fund new originations is substantially limited due to its lenders restrictions or refusals to allow the Company to access their financing arrangements. The Company has been in frequent discussions with its lenders to
identify ways to address their concerns in order to allow a greater funding volume in the near term. However, there can be no assurance that these efforts will succeed.
As a result of the Companys current constrained funding capacity, the Company has elected to cease accepting loan applications from prospective borrowers effective immediately while the Company seeks to obtain additional funding capacity. The Company expects to resume accepting applications as soon as
practicable, however, there can be no assurance that the Company will be able to resume accepting applications.

[firestarter]

Excellent info from socalmortgageguy:

$this->bbcode_second_pass_quote('', 'T')o make matters worse, the lenders that used to make these great ‘you can afford the American dream’ loans are either out of business or headed that way. I heard some intel that New Century is going to file for Chapter 11 here in the near future. Not only that, but like most of these other ’subprime’ lenders, has some pretty major accounting issues to ‘account’ for. BUT, even if the companies were still around to make the loans, nobody is buying them!

I have discussed the MBS (mortgage backed securities) market many times before. I have a friend that is now in the corporate offices of a major lender. He told me that the secondary market is basically paying ‘par’ for most ’subprime’ loan pools now. What does that mean?? It means that if a lender has a 500 million dollar pool of loans and they go to sell them, the secondary market will pay them 500 million for the loans. Dare I say it is hard to make money selling widgets that cost you $10…for $10. I am not including the expenses involved in making the loans either.

The way it should work is that the lender sells the $500 million of loans for say $520 million. Then goes back and lends that money…repeat cycle. Making money each time they sell the loans, which in turn gives them more money to lend out, and in turn sell for more money.....

If you think the nonsense in the lending arena was concentrated only in the subprime markets, you are mistaken. It has permeated all aspects of lending. Risk assessment has been shoved aside for the past few years…be it mortgages, car loans, credit cards, etc. With the massive consumption by most Americans being done on credit, look for trouble up ahead…but it will require you to stop looking in your rear-view mirror to see it.

[username]

$this->bbcode_second_pass_quote('Eli', 'A')nd here is where my new ultra doomer theory comes in. The Fed is going to do everything to limit the housing bust. They will print funny money like mad to give to the banks to buy back and prop up their own subprime lackeys. This desperate effort to keep the economic engine running will back fire.

[I_Like_Plants]

There's a book by the Nolo Press about the new bankruptcy law, you have to go to counseling, but essentially you pay things off by $100 a month....... $100 a month is going to be nothing in inflato-bucks.

[DantesPeak]

Lenders cut off financing to New Century:

$this->bbcode_second_pass_quote('', 'N')ew Century: All Bank Lenders To Cut Off Short-Term Funding

DOW JONES NEWSWIRES
March 12, 2007 7:17 a.m.

NEW YORK (Dow Jones)--New Century Financial Corp. (NEW) disclosed early Monday morning that all of its bank lenders had either cut off their short-term funding to the beleaguered home lender or notified the company of their intent to do so.

The move came after New Century received notices of default from eight of its lenders - including Morgan Stanley (MS), which extended the company an emergency financing package last week.

The disclosure is ominous. Like other independent mortgage lenders, the Irvine, Calif., company relies on short-term financing from Wall Street firms and big commercial banks to make home loans. Those lines of credit allow the lender to provide the funds borrowers use to pay for their homes. New Century then uses the money it gets from the sale of the mortgage in the secondary market to pay down the financing.

New Century said it has received notices of default from lenders including Bank of America Corp. (BAC), Citigroup Inc. (C), Credit Suisse Group (CS), Goldman Sachs Group (GS) and Morgan Stanley. It also said some of those lenders are accelerating the company's obligation to buy back all outstanding mortgage loans financed under their respective funding agreements.

[seahorse2]

This subprime lending collapse is shaping up to be just as bad as the worse case scenario pessimist have forecast it to be.

Federal Reserve Govenor tells fellow bankers that the economic fallout wave is just beginning.

Bloomberg

I also don't think its coincidental that the Chinese are now publicly stating they are going to diversify their foriegn reserve holdings. Why invest in a failing US economy?

Global Research

[seahorse2]

Credit counselors overwhelmed by mortgage crisis.

Yahoo News

[RonMN]

Home Vanishing Home

Quote:
The numbers do not lie. According to March 13 figures released by the Mortgage Bankers Association, a national organization based in Washington, D.C., mortgage delinquencies on one- to four-unit residential properties rose to 4.95 percent for the fourth quarter of 2006, the highest since first-quarter 2004. The rate for foreclosures—meaning that the lender takes back the home—jumped to 1.19 percent, up from 1.05 in the third quarter.

The numbers are even scarier close to home. RealtyTrac, an online foreclosure property marketplace, reported in February that foreclosures in New York State have increased by 9.77 percent since December 2006.

[Eli]

That article is funny.

It goes into great detail about how people should try and stay in their houses and make the payments.

There are some glaring problems with this. Many of the buyers have put up very little of their own money into a house. If a person knows they can no longer afford the house they can just drive by and throw their keys at the bank.

As the prices continue to come down many people will see that their equity is already gone.

Like it was said before the banks don't want to be realtors they just want to make money on paper. This is going to collapse them. They short sell everything for a loss just to get it off the books compounding the problem.

[RonMN]

Eli,
not according to that article I just posted above...

Quote:
Many homeowners decide to declare bankruptcy when they are facing foreclosure proceedings. If successful, bankruptcy will not eliminate your debt to the bank, but rather just buy some time to work out a payment plan. "You can declare Chapter 7, and it can buy you time, but that is about it," says Fischoff.

[Ludi]

$this->bbcode_second_pass_quote('', ' ')With the massive consumption by most Americans being done on credit ...

[Eli]

Well that is what I was talking about they talk at length about people declaring bankruptcy. Or going to credit consolers to work out payments with the bank. The whole article is about keeping people in the house.

They move quickly past the other option people have which is to just pick up and move. And they add the threat that your credit will be ruined more by a foreclosure than a bankruptcy. It makes no sense for people to declare bankruptcy, just so they can still pay a note on a house that could be a sum that is twice what the house is worth.
People are not going to bother to declare bankruptcy if the house loses half its value.

If I was in California right now and was way upside down in my loan I would just walk away.

Here you go friendly scumbag bloodsucking banker fuckstick here are the keys to worthless McMansion, bye bye.

[threadbear]

$this->bbcode_second_pass_quote('Ludi', '')$this->bbcode_second_pass_quote('', ' ')With the massive consumption by most Americans being done on credit ...