1 Down 2 To Go.
I am telling all my investor partners that in 2 more years will be the time
to invest in California Real Estate. So in the meantime I go broke and my
kids starve. Having a conscience can really work against me. I am convinced
the money I don't make now will come back to me ten fold in a couple years.
Please go to East Coast Money.com to always check out the latest in Hot Shot
New York Investors getting ready to buy California Real Estate.
-Christopher Rockey
916.799.8472
Thursday, December 27, 2007
Wednesday, December 26, 2007
HURRY! We Have To Do Nothing
Mortgage mess has government scrambling, unless your hiding behind the Bush
Administration.
WASHINGTON (AP) -- After a slow and stumbling start, Washington is scrambling to prevent the unfolding mortgage crisis from pushing the country into recession during an election year. There is a strong feeling, though, that the government will need to do more to avert a financial disaster.
Former Treasury secretary Lawrence Summers advocates temporary tax cuts and emergency spending on the order of $50 billion to $75 billion. Such action could help the U.S. from slipping into what Summers, who served under President Clinton, fears could become the worst downturn since the steep 1981-82 recession.
Some Republicans are worried, too.
Both Martin Feldstein, who was President Reagan's top economic adviser, and former Federal Reserve Chairman Alan Greenspan have called for deeper government intervention.
So far, the Bush administration has opted for less dramatic measures. In fact, the administration came reluctantly to its biggest step taken - the "teaser freezer."
A deal with the mortgage industry will freeze the low introductory "teaser" rates for five years on some subprime mortgages - loans to people with spotty credit histories. Otherwise the rates will climb much higher, making the mortgages unaffordable for many.
A freeze could buy time for housing to rebound, making it easier for homeowners to refinance to affordable fixed-rate loans. But estimates are that only about 250,000 people will end up getting a freeze - a fraction of the 3.5 million home loans that could go into default over the next two-and-a-half years.
The administration also is working with Congress to increase the $417,000 cap on the size of loans that the big mortgage companies Fannie Mae and Freddie Mac can handle. This step could help in high-cost housing areas such as California.
So we still have a lot of talk. We can support our arguments with great physical
data which only a year ago we could speculating on. If it were me,
and I was President I would tell the people they dug there own graves, now go lye
in them!
Administration.
WASHINGTON (AP) -- After a slow and stumbling start, Washington is scrambling to prevent the unfolding mortgage crisis from pushing the country into recession during an election year. There is a strong feeling, though, that the government will need to do more to avert a financial disaster.
Former Treasury secretary Lawrence Summers advocates temporary tax cuts and emergency spending on the order of $50 billion to $75 billion. Such action could help the U.S. from slipping into what Summers, who served under President Clinton, fears could become the worst downturn since the steep 1981-82 recession.
Some Republicans are worried, too.
Both Martin Feldstein, who was President Reagan's top economic adviser, and former Federal Reserve Chairman Alan Greenspan have called for deeper government intervention.
So far, the Bush administration has opted for less dramatic measures. In fact, the administration came reluctantly to its biggest step taken - the "teaser freezer."
A deal with the mortgage industry will freeze the low introductory "teaser" rates for five years on some subprime mortgages - loans to people with spotty credit histories. Otherwise the rates will climb much higher, making the mortgages unaffordable for many.
A freeze could buy time for housing to rebound, making it easier for homeowners to refinance to affordable fixed-rate loans. But estimates are that only about 250,000 people will end up getting a freeze - a fraction of the 3.5 million home loans that could go into default over the next two-and-a-half years.
The administration also is working with Congress to increase the $417,000 cap on the size of loans that the big mortgage companies Fannie Mae and Freddie Mac can handle. This step could help in high-cost housing areas such as California.
So we still have a lot of talk. We can support our arguments with great physical
data which only a year ago we could speculating on. If it were me,
and I was President I would tell the people they dug there own graves, now go lye
in them!
Friday, December 21, 2007
You Have To Read This Article
I have never thought of Donna as a perfect 10 until today. Her enthusiasm
and sarcasm are boiled brilliantly together in this article.
Hat's Off!
ARM Freeze Yields Solution To All World Problems
By Donna Robinson - OP-ED COLUMNIST
Lets congratulate the Bush administration, the Federal Reserve and the democrat controlled Congress. It looks like they have come up with a breakthrough approach to problem solving that may finally end the world's problems once and for all.
The breakthrough came with the idea to freeze ARM rates so that borrowers will not be subjected to the terms of the agreements that they voluntarily signed. Combine that innovative thinking with the ongoing efforts to save Wall Street from its own irresponsible actions. It seems that the U.S. government and the federal reserve will finally succeed in realizing a foundational tenet of liberal politics - change the laws and the way financial markets work so that we can eliminate personal responsibility and individual accountability once and for all.
Just ignore the fact that the "full faith and credit" of the United States government will be undermined and perhaps destroyed. Never mind that every individual involved here has made decisions that they knew had risk and potential consequences.
Lets just ignore the terms of existing mortgage loans, let all borrowers in default off the hook, pass some new laws, and expand FHA so that the American taxpayer can be required to pick up the tab for a new round of subprime lending under the guise of "government guaranteed loans". That way we can avoid a financial meltdown, avoid consequences of our collective actions, and continue to expand this madness even further by making the same stupid financial decisions in the future at taxpayer expense.
But in pondering the situation in which we now find ourselves, I realized that in fact this line of reasoning may actually be used to save the world and solve all of the worlds major problems.
If we can simply decide to alter the way financial markets operate, change existing contractual commitments in the middle of the game, and in the process ignore the long term consequences of such ill advised actions, then lets just take this line of reasoning one step further and solve all of the worlds problems.
As soon as the U.S. government gets finished solving the world credit crisis, which may take another week or two, lets move on to some other major issues...
Global warming - How about a law that stops global warming by mandating that all future carbon emissions should fall to the ground and wash away with the next good rain storm?
Eliminate the threat of world pandemics like Bird Flu - How about a law that says that all birds who are sneezing or have a "runny beak" shall be required to stay at least 1000 feet away from any humans?
World Hunger - While we're at it, lets make sure that all of the oppressive regimes in the "third world" are required to feed all of their citizens until they get at least as fat as the average citizen of "first world" nations.
I know what you are thinking...these are obviously silly ideas that can't be enforced by passing laws...I rest my case.
Only one thing can solve the present financial crisis we find ourselves in, and that is to let the chips fall where they may. Let the free markets do their thing, let the accountability fall where it lies...at the feet of those who have made irresponsible financial decisions that they must be held accountable for. Let all involved learn their lessons, and learn that decisions have consequences, and that risk and reward go hand in hand.
We will never solve problems by ignoring them, failing to account for them or by trying to avoid the consequences of our actions. Borrowers who borrowed more than they could afford should learn that there is a price to be paid for such irresponsibility. Lenders who make loans to people who can't afford those loans need to understand that there are consequences for such irresponsible business practices. Investors seeking high returns need to understand that high risk follows high reward. All investments look good on paper, but reality can be a very different thing.
Until we are willing to confront our own financial irresponsibility by facing the consequences of our own personal decisions all the way down the financial "food chain", we will never reach a point of true financial stability again. America is already at a crisis point, and a potential turning point in our history that threatens to undermine our national stability and could well be our undoing in the near future. Only a return to integrity and personal accountability will stabilize the system and restore the "full faith and credit" of the United States of America.
Any financial system is only as good as the integrity and commitment of the individuals who are involved in it. When it's all said and done, it all boils down the the actions and decisions of millions of individuals. There is a reason why home buyers were once required to make substantial downpayments. And there is a reason why financial managers are expected to follow common sense rules of finance and investment.
Oh - I just thought of one more law we need to pass...let's recognize that the government is not our "baby-daddy". We don't need more "child support" to be paid by already over-burdened American taxpayers. Let's pass a law that says that all members of the U.S. Congress, and all state and local municipalities must manage taxpayer funds with sound financial principles so that the American taxpayers actually realize a solid return on their investment...Yeah, I know, this really IS the most ridiculous idea of all, but you can't blame me for daydreaming.
Contributed By: Donna Robinson
Donna Robinson is a licensed Realtor in Georgia. She is also a recognized real estate author, investing consultant and market analyst, as well as the Director of The Real Estate Arena.
and sarcasm are boiled brilliantly together in this article.
Hat's Off!
ARM Freeze Yields Solution To All World Problems
By Donna Robinson - OP-ED COLUMNIST
Lets congratulate the Bush administration, the Federal Reserve and the democrat controlled Congress. It looks like they have come up with a breakthrough approach to problem solving that may finally end the world's problems once and for all.
The breakthrough came with the idea to freeze ARM rates so that borrowers will not be subjected to the terms of the agreements that they voluntarily signed. Combine that innovative thinking with the ongoing efforts to save Wall Street from its own irresponsible actions. It seems that the U.S. government and the federal reserve will finally succeed in realizing a foundational tenet of liberal politics - change the laws and the way financial markets work so that we can eliminate personal responsibility and individual accountability once and for all.
Just ignore the fact that the "full faith and credit" of the United States government will be undermined and perhaps destroyed. Never mind that every individual involved here has made decisions that they knew had risk and potential consequences.
Lets just ignore the terms of existing mortgage loans, let all borrowers in default off the hook, pass some new laws, and expand FHA so that the American taxpayer can be required to pick up the tab for a new round of subprime lending under the guise of "government guaranteed loans". That way we can avoid a financial meltdown, avoid consequences of our collective actions, and continue to expand this madness even further by making the same stupid financial decisions in the future at taxpayer expense.
But in pondering the situation in which we now find ourselves, I realized that in fact this line of reasoning may actually be used to save the world and solve all of the worlds major problems.
If we can simply decide to alter the way financial markets operate, change existing contractual commitments in the middle of the game, and in the process ignore the long term consequences of such ill advised actions, then lets just take this line of reasoning one step further and solve all of the worlds problems.
As soon as the U.S. government gets finished solving the world credit crisis, which may take another week or two, lets move on to some other major issues...
Global warming - How about a law that stops global warming by mandating that all future carbon emissions should fall to the ground and wash away with the next good rain storm?
Eliminate the threat of world pandemics like Bird Flu - How about a law that says that all birds who are sneezing or have a "runny beak" shall be required to stay at least 1000 feet away from any humans?
World Hunger - While we're at it, lets make sure that all of the oppressive regimes in the "third world" are required to feed all of their citizens until they get at least as fat as the average citizen of "first world" nations.
I know what you are thinking...these are obviously silly ideas that can't be enforced by passing laws...I rest my case.
Only one thing can solve the present financial crisis we find ourselves in, and that is to let the chips fall where they may. Let the free markets do their thing, let the accountability fall where it lies...at the feet of those who have made irresponsible financial decisions that they must be held accountable for. Let all involved learn their lessons, and learn that decisions have consequences, and that risk and reward go hand in hand.
We will never solve problems by ignoring them, failing to account for them or by trying to avoid the consequences of our actions. Borrowers who borrowed more than they could afford should learn that there is a price to be paid for such irresponsibility. Lenders who make loans to people who can't afford those loans need to understand that there are consequences for such irresponsible business practices. Investors seeking high returns need to understand that high risk follows high reward. All investments look good on paper, but reality can be a very different thing.
Until we are willing to confront our own financial irresponsibility by facing the consequences of our own personal decisions all the way down the financial "food chain", we will never reach a point of true financial stability again. America is already at a crisis point, and a potential turning point in our history that threatens to undermine our national stability and could well be our undoing in the near future. Only a return to integrity and personal accountability will stabilize the system and restore the "full faith and credit" of the United States of America.
Any financial system is only as good as the integrity and commitment of the individuals who are involved in it. When it's all said and done, it all boils down the the actions and decisions of millions of individuals. There is a reason why home buyers were once required to make substantial downpayments. And there is a reason why financial managers are expected to follow common sense rules of finance and investment.
Oh - I just thought of one more law we need to pass...let's recognize that the government is not our "baby-daddy". We don't need more "child support" to be paid by already over-burdened American taxpayers. Let's pass a law that says that all members of the U.S. Congress, and all state and local municipalities must manage taxpayer funds with sound financial principles so that the American taxpayers actually realize a solid return on their investment...Yeah, I know, this really IS the most ridiculous idea of all, but you can't blame me for daydreaming.
Contributed By: Donna Robinson
Donna Robinson is a licensed Realtor in Georgia. She is also a recognized real estate author, investing consultant and market analyst, as well as the Director of The Real Estate Arena.
Thursday, December 20, 2007
.40 Cents On the Dollar Residentual Properties
If you are an investor or Realtor that knows investors that are cash players.
Let me know now. The bottom is falling and I have recently negotiated a deal
to allow investors to buy homes at .40C on the dollar. Minimum investment is
three million dollars cash and the best part is, most homes already have
tenants paying!
-Christopher Rockey
rockey_finance@yahoo.com
888.212.7577
Let me know now. The bottom is falling and I have recently negotiated a deal
to allow investors to buy homes at .40C on the dollar. Minimum investment is
three million dollars cash and the best part is, most homes already have
tenants paying!
-Christopher Rockey
rockey_finance@yahoo.com
888.212.7577
Wednesday, December 19, 2007
All Taxes Are Not Created Equal
While it's true that the Internal Revenue Service usually taxes every last cent we make, not every penny is taxed the same.
When it comes to ordinary wage or salary income, the U.S. tax system is progressive, with individual tax amounts currently spread over six income brackets. The tax rates begins at 10 percent and go as high as 35 percent. In between are the 15 percent, 25 percent, 28 percent and 33 percent brackets.
By stair-stepping tax brackets, our progressive taxation system means that all levels of income aren't taxed at the same rate. The first portion of your earnings is taxed at the lowest, 10-percent, rate. The subsequent rates start applying when your income hits a set level for your filing status.
This means that your income is then taxed at the applicable rate for each portion of your earnings that falls into a particular range. Each bracket also takes into account a taxpayer's filing status, such as single or married filing a joint return.
In addition, the tax bracket amounts are adjusted each year to reflect inflation. Here are the 2007 brackets, which you'll use when filing your 2007 return next year, and the 2008 tax brackets, which will give you an idea of your 2008 tax bill.
I would include the tax tables for you but I don't want some moron pointing his finger at me saying "He Told Me So." On that note, so why did I include this article?
Simply because it's a silly bureaucratic way for a major information source to dance around the question at hand. If I Foreclose will I get a 1099. The answer is YES!
The type of money you foreclose on determines the type of recourse your lender has
1099A Purchase money or 1099C Non purchase money.
-Christopher Rockey
When it comes to ordinary wage or salary income, the U.S. tax system is progressive, with individual tax amounts currently spread over six income brackets. The tax rates begins at 10 percent and go as high as 35 percent. In between are the 15 percent, 25 percent, 28 percent and 33 percent brackets.
By stair-stepping tax brackets, our progressive taxation system means that all levels of income aren't taxed at the same rate. The first portion of your earnings is taxed at the lowest, 10-percent, rate. The subsequent rates start applying when your income hits a set level for your filing status.
This means that your income is then taxed at the applicable rate for each portion of your earnings that falls into a particular range. Each bracket also takes into account a taxpayer's filing status, such as single or married filing a joint return.
In addition, the tax bracket amounts are adjusted each year to reflect inflation. Here are the 2007 brackets, which you'll use when filing your 2007 return next year, and the 2008 tax brackets, which will give you an idea of your 2008 tax bill.
I would include the tax tables for you but I don't want some moron pointing his finger at me saying "He Told Me So." On that note, so why did I include this article?
Simply because it's a silly bureaucratic way for a major information source to dance around the question at hand. If I Foreclose will I get a 1099. The answer is YES!
The type of money you foreclose on determines the type of recourse your lender has
1099A Purchase money or 1099C Non purchase money.
-Christopher Rockey
Here Come the Chineese
Another major American financial institution went on the international auction block Wednesday afternoon as Morgan Stanley announced it was accepting a $5 billion cash infusion from China Investment in return for a stake in the bank estimated to be as high as 9.9 percent. The Chinese company will be a passive investor and will not have a seat on its board or a role in management.
Morgan, one of the nation's largest investment banks had earlier in the day reported a huge fourth-quarter loss tied to an unexpectedly large $9.4 billion write-down in mortgages and other assets. This was nearly twice the $5 billion loss that analysts and market-watchers were expected as the bank went on the offensive to write down its exposure to losses from derivatives and mortgage securities.
We already know that the Chinese control our long term interest rates. We already know if the Chinese sold all the long term bonds they own, our 30 year rates will
double overnight. Now the Chinese are buying into our banking systems.
Let me get this straight, the Chinese, who have terrorist cells hiding within
there borders. Who can send us into a great depression any given day are now able
to leverage our own banks and possibly position themselves into our own system and use it against us.
Morgan, one of the nation's largest investment banks had earlier in the day reported a huge fourth-quarter loss tied to an unexpectedly large $9.4 billion write-down in mortgages and other assets. This was nearly twice the $5 billion loss that analysts and market-watchers were expected as the bank went on the offensive to write down its exposure to losses from derivatives and mortgage securities.
We already know that the Chinese control our long term interest rates. We already know if the Chinese sold all the long term bonds they own, our 30 year rates will
double overnight. Now the Chinese are buying into our banking systems.
Let me get this straight, the Chinese, who have terrorist cells hiding within
there borders. Who can send us into a great depression any given day are now able
to leverage our own banks and possibly position themselves into our own system and use it against us.
Tell Us Something We Don't Know
Homes in Sacramento are 59 percent overpriced, according to a recent analysis.
Sacramento trailed only six cities -- five of which are in California -- in a study of 100 housing markets by Local Market Monitor, which compared selling price to "equilibrium values." The equilibrium value was compiled based on such factors as economic and population growth, vacancy rates and construction costs.
The report found the median price of a home in Sacramento to be $366,900, compared to an equilibrium price of $230,900, a 59 percent difference in price. An overpriced market has a median home price more than 15 percent higher than the equilibrium price, according to the report published by CNN Money. The report did not specify if Sacramento included nearby cities.
The overall number of overprice markets fell in first-quarter 2006, compared to the same three-month period last year, dropping from 40 to 38. Of the 100 markets analyzed, 56 are fairly priced.
OK, I think we have all come to the reality that half our equity is going to be lost.
That's great how about an article on the emotional turmoil people will be going through that do decide to keep there house. Would you want to pay a four thousand a month payment on a house that is not worth more than a $1,700.00 a month payment for
the same qualified buyer. How about the hit on the interest rate people took to get a jumbo size loan when they have no need for that.
Think that mentality will effect the housing market?
-Christopher Rockey
Sacramento trailed only six cities -- five of which are in California -- in a study of 100 housing markets by Local Market Monitor, which compared selling price to "equilibrium values." The equilibrium value was compiled based on such factors as economic and population growth, vacancy rates and construction costs.
The report found the median price of a home in Sacramento to be $366,900, compared to an equilibrium price of $230,900, a 59 percent difference in price. An overpriced market has a median home price more than 15 percent higher than the equilibrium price, according to the report published by CNN Money. The report did not specify if Sacramento included nearby cities.
The overall number of overprice markets fell in first-quarter 2006, compared to the same three-month period last year, dropping from 40 to 38. Of the 100 markets analyzed, 56 are fairly priced.
OK, I think we have all come to the reality that half our equity is going to be lost.
That's great how about an article on the emotional turmoil people will be going through that do decide to keep there house. Would you want to pay a four thousand a month payment on a house that is not worth more than a $1,700.00 a month payment for
the same qualified buyer. How about the hit on the interest rate people took to get a jumbo size loan when they have no need for that.
Think that mentality will effect the housing market?
-Christopher Rockey
Fed Lending 20 Billion, Big Woopie
The Federal Reserve announced Wednesday that it was lending $20 billion to banks in the first of four special auctions designed to help alleviate the credit crunch on Wall Street.
The Fed said that it received requests for $61.6 billion in loans from 93 bidders - illustrating strong demand by banks that need short-term funds. The winning bidders will receive their loans, which will mature in 28 days, on Thursday.
Initially, stocks moved modestly higher Wednesday following the release of the auction results but headed lower in early afternoon trading. The price of bonds fell at first but wound up rallying later in the morning, pushing the yield on the benchmark 10-year U.S. Treasury note down to 4.09 percent. Bond yields and prices move in opposite directions.
This is obnoxious and absurd, what 20 billion dollars is supposed to help a
trillion and a half dollar problem and then they have the balls to make themselves sound like heroes.
They should be put to sleep like rabid animals. The only request I have seen or
heard of that was more ridiculous was directly from Hillary when she said we need a billion dollar fund to help. That narrow minded behavior is your first warning for
what could be.
Sorry to change my positive thinking but, I am now sick of people being lied to
and told "Every thing's going to be Fine." Horse shit if you ask me. We are going
to face one of the largest recessions since the depression.
-Christopher Rockey
The Fed said that it received requests for $61.6 billion in loans from 93 bidders - illustrating strong demand by banks that need short-term funds. The winning bidders will receive their loans, which will mature in 28 days, on Thursday.
Initially, stocks moved modestly higher Wednesday following the release of the auction results but headed lower in early afternoon trading. The price of bonds fell at first but wound up rallying later in the morning, pushing the yield on the benchmark 10-year U.S. Treasury note down to 4.09 percent. Bond yields and prices move in opposite directions.
This is obnoxious and absurd, what 20 billion dollars is supposed to help a
trillion and a half dollar problem and then they have the balls to make themselves sound like heroes.
They should be put to sleep like rabid animals. The only request I have seen or
heard of that was more ridiculous was directly from Hillary when she said we need a billion dollar fund to help. That narrow minded behavior is your first warning for
what could be.
Sorry to change my positive thinking but, I am now sick of people being lied to
and told "Every thing's going to be Fine." Horse shit if you ask me. We are going
to face one of the largest recessions since the depression.
-Christopher Rockey
Fed Lowering Interest Rates Still Not Helping
Mortgage application volume plummeted 19.5 percent during the week ending Dec. 14, according to the Mortgage Bankers Association's weekly application survey.
The trade group's application index fell to 653.8 from 811.8 the previous week.
Refinance volume tumbled 27.3 percent during the week, while purchase volume fell 10.6 percent. Refinance applications accounted for 53.2 percent of total mortgage applications, down from 57.6 percent during the prior week.
OK granted, December is always the slowest month of the year traditionally.
But 19.5 % are you kidding me.
Plan on reading big headlines in January saying "Mortgage applications up 10%"
"Economy turning" and "A Light at the end of the Tunnel."
All garbage of course because even mortgage applications do go up 15% in
January, we are still left with a 5% variance from December.
-Christopher Rockey
The trade group's application index fell to 653.8 from 811.8 the previous week.
Refinance volume tumbled 27.3 percent during the week, while purchase volume fell 10.6 percent. Refinance applications accounted for 53.2 percent of total mortgage applications, down from 57.6 percent during the prior week.
OK granted, December is always the slowest month of the year traditionally.
But 19.5 % are you kidding me.
Plan on reading big headlines in January saying "Mortgage applications up 10%"
"Economy turning" and "A Light at the end of the Tunnel."
All garbage of course because even mortgage applications do go up 15% in
January, we are still left with a 5% variance from December.
-Christopher Rockey
Tuesday, December 18, 2007
New Homebuilders Index Scraping the Bottom
A December reading of U.S. homebuilders' sentiment remained at a record low for the third straight month.
The National Association of Home Builders said Monday its housing market index, which gauges builders' perceptions of conditions and expectations for home sales over the next six months, came in at 19 in December. The number was at the lowest level since the index began in January 1985.
Index readings higher than 50 indicate positive sentiment. The seasonally adjusted index has been below 50 since May 2006, and declined for eight straight months this year, and has been unchanged since October.
Tighter lending standards, rising defaults among borrowers with weak credit and a sense of worry about the housing market's future have meant fewer buyers for hard-hit homebuilders such as D.R. Horton (DHI, Fortune 500), Pulte Homes (PHM, Fortune 500) and Centex (CTX, Fortune 500).
Many builders are "bracing themselves for the winter months when home buying traditionally slows, scaling down their inventories and repositioning themselves for the time when market conditions can support an upswing in building activity," David Seiders, the trade group's chief economist said in a statement.
That's likely to occur, he said, by the second half of next year.
Confidence dropped in the northeast, but inched up in the Midwest and South. It remained unchanged in western states.
Nationwide, new-home sales are projected to fall to 788,000 this year, down 25 percent from 1.05 million last year, the National Association of Realtors said last week. Sales are expected to drop further to 693,000 in 2008, according to the Realtors' group.
The National Association of Home Builders said Monday its housing market index, which gauges builders' perceptions of conditions and expectations for home sales over the next six months, came in at 19 in December. The number was at the lowest level since the index began in January 1985.
Index readings higher than 50 indicate positive sentiment. The seasonally adjusted index has been below 50 since May 2006, and declined for eight straight months this year, and has been unchanged since October.
Tighter lending standards, rising defaults among borrowers with weak credit and a sense of worry about the housing market's future have meant fewer buyers for hard-hit homebuilders such as D.R. Horton (DHI, Fortune 500), Pulte Homes (PHM, Fortune 500) and Centex (CTX, Fortune 500).
Many builders are "bracing themselves for the winter months when home buying traditionally slows, scaling down their inventories and repositioning themselves for the time when market conditions can support an upswing in building activity," David Seiders, the trade group's chief economist said in a statement.
That's likely to occur, he said, by the second half of next year.
Confidence dropped in the northeast, but inched up in the Midwest and South. It remained unchanged in western states.
Nationwide, new-home sales are projected to fall to 788,000 this year, down 25 percent from 1.05 million last year, the National Association of Realtors said last week. Sales are expected to drop further to 693,000 in 2008, according to the Realtors' group.
Monday, December 17, 2007
Excellent News For Less Than 1/10 of Troubled Homeowners
So-called FHA reform reached an important milestone on Friday when the U.S. Senate overwhelmingly approved its version of the legislation.
The bill, which passed by a vote of 93-1, seeks to make the Federal Housing Administration more relevant in the current housing and mortgage lending environment by expanding the agency, loosening some underwriting standards, and raising its current restrictive loan limit.
The FHA was established in 1934 to help borrowers, particularly those with low incomes, purchase homes by guaranteeing banks that those loans would be repaid should the borrower default. But the agency's loan limits have generally lagged behind those of Freddie Mac and Fannie Mae and as home prices climbed dramatically and lenders with looser underwriting standards proliferated the agency became less and less of a player in the mortgage market.
Over a ten year period ending last December the FHA's share of new mortgages fell from 9.1 percent to 1.8 percent according to Inside Mortgage Finance. A major reason for the slide is the FHA loan cap which, in many parts of the country such as both coasts, falls short of covering the purchase price of even a low end house.
FHA insured loans have been mentioned as a possible escape hatch for borrowers who may be unable to make payments on their current adjustable rate mortgages when their interest rates reset over the next year. The restrictive loan limits, however, make that impossible for many of those borrowers. There is also a theory that a more widely available federal guarantee would encourage lenders to make more loans in the current tight credit environment.
The Senate version of FHA reform would raise the limit on FHA loans from $362,000 to at least $417,000 which is the current limit on Freddie Mac, Fannie Mae, and Veterans Administration loans.
The FHA estimates that it may be able to help some 200,000 borrowers who are facing foreclosure with the new limits coupled with loosened underwriting standards which were announced by the president several months ago.
In October the House of Representatives passed legislation similar to that passed in the Senate but some differences between the two bills will have to be hammered out before a final version is sent to the president for his signature.
The House bill would raise the loan limit as high as $829,750 in certain areas of the country but the biggest stumbling block to a compromise is a feature of the House bill which establishes a new housing trust fund for troubled borrowers and would require FHA to contribute to it.
Also on Friday the Senate passed a separate borrower relief bill which would end, for three years, a provision in the tax code which has bitten many a homeowner after foreclosure or a loan workout. Under current rules the Internal Revenue Service requires lenders to send borrowers and the IRS a form detailing any loan amounts written off by the lender after a foreclosure, short sale, or loan restructure. The IRS treats that forgiven debt as ordinary income and taxes the borrower accordingly.
The House had earlier passed similar legislation but without the three year sunset provision.
In other mortgage news, Reuters reported on Friday that the hotline established by the HOPE NOW alliance had received 45,000 calls in the three days after its establishment was announced by President Bush. The hot-line provides foreclosure prevention counseling to borrowers who qualify for an interest rate freeze worked out between the Treasury Department and major lenders. The telephone number for the program is 1-888-995-HOPE.
The bill, which passed by a vote of 93-1, seeks to make the Federal Housing Administration more relevant in the current housing and mortgage lending environment by expanding the agency, loosening some underwriting standards, and raising its current restrictive loan limit.
The FHA was established in 1934 to help borrowers, particularly those with low incomes, purchase homes by guaranteeing banks that those loans would be repaid should the borrower default. But the agency's loan limits have generally lagged behind those of Freddie Mac and Fannie Mae and as home prices climbed dramatically and lenders with looser underwriting standards proliferated the agency became less and less of a player in the mortgage market.
Over a ten year period ending last December the FHA's share of new mortgages fell from 9.1 percent to 1.8 percent according to Inside Mortgage Finance. A major reason for the slide is the FHA loan cap which, in many parts of the country such as both coasts, falls short of covering the purchase price of even a low end house.
FHA insured loans have been mentioned as a possible escape hatch for borrowers who may be unable to make payments on their current adjustable rate mortgages when their interest rates reset over the next year. The restrictive loan limits, however, make that impossible for many of those borrowers. There is also a theory that a more widely available federal guarantee would encourage lenders to make more loans in the current tight credit environment.
The Senate version of FHA reform would raise the limit on FHA loans from $362,000 to at least $417,000 which is the current limit on Freddie Mac, Fannie Mae, and Veterans Administration loans.
The FHA estimates that it may be able to help some 200,000 borrowers who are facing foreclosure with the new limits coupled with loosened underwriting standards which were announced by the president several months ago.
In October the House of Representatives passed legislation similar to that passed in the Senate but some differences between the two bills will have to be hammered out before a final version is sent to the president for his signature.
The House bill would raise the loan limit as high as $829,750 in certain areas of the country but the biggest stumbling block to a compromise is a feature of the House bill which establishes a new housing trust fund for troubled borrowers and would require FHA to contribute to it.
Also on Friday the Senate passed a separate borrower relief bill which would end, for three years, a provision in the tax code which has bitten many a homeowner after foreclosure or a loan workout. Under current rules the Internal Revenue Service requires lenders to send borrowers and the IRS a form detailing any loan amounts written off by the lender after a foreclosure, short sale, or loan restructure. The IRS treats that forgiven debt as ordinary income and taxes the borrower accordingly.
The House had earlier passed similar legislation but without the three year sunset provision.
In other mortgage news, Reuters reported on Friday that the hotline established by the HOPE NOW alliance had received 45,000 calls in the three days after its establishment was announced by President Bush. The hot-line provides foreclosure prevention counseling to borrowers who qualify for an interest rate freeze worked out between the Treasury Department and major lenders. The telephone number for the program is 1-888-995-HOPE.
Friday, December 14, 2007
You Heard It Here First
Fannie Mae's CEO told shareholders Friday he does not expect a housing market recovery until late 2009, "at the earliest," and that the mortgage-finance company is strong enough to ride out the downturn.
Fannie Mae "will weather the turbulence of today's mortgage market and prosper when better conditions return," the president and CEO, Daniel Mudd, said as he and other top executives faced shareholders for the first time in three-and-a-half years at an annual meeting.
After posting a third-quarter loss of $1.4 billion, the largest U.S. buyer and guarantor of home mortgages recently cut its dividend and announced plans to sell $7 billion in preferred stock to raise capital to keep its cushion against risk within regulatory requirements.
One shareholder unconvinced by Mudd's assurances was investor activist Evelyn Y. Davis, who rose at the meeting and urged the government-sponsored company's directors to replace Mudd with Louis Freeh, the former FBI director elected to the Fannie board last spring.
Freeh is "the only one who would clean this up and really do this right," said Davis, whose mordant criticism of the company's leaders dominated much of the two-hour meeting.
Davis, who often peppers corporate CEOs with questions at shareholder meetings, said she would not vote for any of the directors standing for re-election other than Freeh. Freeh previously was general counsel and ethics officer of credit-card issuer MBNA Corp.
Despite Davis's protestations, the 12 Fannie directors — nine of whom came to the company after its accounting crisis in 2004 — were re-elected.
Mudd said Fannie Mae was "in a stronger position" because of the extensive changes to its management and operations over the past three years made in the wake of its $6.3 billion accounting scandal and with the recent steps taken to curb losses and buttress its finances.
He called them "extraordinary steps, but steps we believe are prudent."
The Fannie chief reaffirmed his gloomy forecast for the housing market, saying "This is the worst housing and mortgage market in recent memory, and we are still working our way to the bottom, in our view."
It was Washington-based Fannie Mae's first annual meeting since May 2004, five months before the accounting crisis erupted and led to the ouster of its highest executives, tarnished its reputation, and prompted federal regulators to fine it and impose restraints on its operations.
"We are rebuilding our culture," Chairman Stephen Ashley told the shareholders.
Fannie's stock price has been battered. On Friday, shares climbed $1 to $35.76, or about 50 percent below the high point of $70.57 over the past year.
__
On the Net:
Fannie Mae: http://www.fanniemae.com
Freddie Mac: http://www.freddiemac.com
Fannie Mae "will weather the turbulence of today's mortgage market and prosper when better conditions return," the president and CEO, Daniel Mudd, said as he and other top executives faced shareholders for the first time in three-and-a-half years at an annual meeting.
After posting a third-quarter loss of $1.4 billion, the largest U.S. buyer and guarantor of home mortgages recently cut its dividend and announced plans to sell $7 billion in preferred stock to raise capital to keep its cushion against risk within regulatory requirements.
One shareholder unconvinced by Mudd's assurances was investor activist Evelyn Y. Davis, who rose at the meeting and urged the government-sponsored company's directors to replace Mudd with Louis Freeh, the former FBI director elected to the Fannie board last spring.
Freeh is "the only one who would clean this up and really do this right," said Davis, whose mordant criticism of the company's leaders dominated much of the two-hour meeting.
Davis, who often peppers corporate CEOs with questions at shareholder meetings, said she would not vote for any of the directors standing for re-election other than Freeh. Freeh previously was general counsel and ethics officer of credit-card issuer MBNA Corp.
Despite Davis's protestations, the 12 Fannie directors — nine of whom came to the company after its accounting crisis in 2004 — were re-elected.
Mudd said Fannie Mae was "in a stronger position" because of the extensive changes to its management and operations over the past three years made in the wake of its $6.3 billion accounting scandal and with the recent steps taken to curb losses and buttress its finances.
He called them "extraordinary steps, but steps we believe are prudent."
The Fannie chief reaffirmed his gloomy forecast for the housing market, saying "This is the worst housing and mortgage market in recent memory, and we are still working our way to the bottom, in our view."
It was Washington-based Fannie Mae's first annual meeting since May 2004, five months before the accounting crisis erupted and led to the ouster of its highest executives, tarnished its reputation, and prompted federal regulators to fine it and impose restraints on its operations.
"We are rebuilding our culture," Chairman Stephen Ashley told the shareholders.
Fannie's stock price has been battered. On Friday, shares climbed $1 to $35.76, or about 50 percent below the high point of $70.57 over the past year.
__
On the Net:
Fannie Mae: http://www.fanniemae.com
Freddie Mac: http://www.freddiemac.com
Thursday, December 13, 2007
Bloomberg Update On the Brothers
Lehman Earnings Drop 12% After Mortgage Writedown (Update4)
Dec. 13 (Bloomberg) -- Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage-backed bonds, said earnings fell for a second straight quarter and losses from the collapse of the subprime market will extend into next year.
Fourth-quarter net income declined 12 percent to $886 million, or $1.54 a share, from $1 billion, or $1.72, a year earlier, the New York-based company said today in a statement. A drop in the value of mortgage-related securities and real-estate holdings cut revenue by $830 million. Lehman fell 3.1 percent on the New York Stock Exchange, less than Wall Street rivals.
Lehman's earnings exceeded analysts' estimates after revenue from trading stocks more than doubled, helped by private-equity gains and the firm's investment in hedge fund GLG Partners Inc. The board gave Chief Executive Officer Richard Fuld a $35 million stock award for the year as Lehman, the fourth-largest U.S. securities firm by market value, avoided the losses analysts predict Wall Street rivals Morgan Stanley and Bear Stearns Cos. will report next week.
``Lehman has seemed to limit its balance-sheet exposure to subprime, keeping the writedowns reasonable,'' said Benjamin Wallace, who helps manage $750 million at Grimes & Co. in Westborough, Massachusetts. ``They're still a big fixed-income player and that business will probably slow down further next year, so the share price isn't rewarding their performance yet.''
Lehman fell $1.89 to $59.93 in composite trading on the New York Stock Exchange at 12:49 p.m. The stock declined 21 percent this year through yesterday, compared with Morgan Stanley's 25 percent drop, Bear Stearns's 38 percent slide and Goldman Sachs Group Inc.'s 6.6 percent advance.
Revenue Decline
All four firms sank today on concern a Federal Reserve plan to provide financial companies with as much as $64 billion is failing to boost lending.
Lehman's fourth-quarter revenue fell 3 percent to $4.39 billion, with a record 62 percent coming from non-U.S. businesses. Return on equity decreased to 16.6 percent from 22.3 percent a year earlier. The company has reported two consecutive quarters of declining profits for the first time in five years, though earnings for the full year were a record $4.2 billion.
While fixed-income trading revenue declined 60 percent to $860 million in the quarter, equity trading more than doubled to $1.9 billion.
The GLG transaction contributed about $500 million in revenue for the quarter, risk management head Christopher O'Meara said on a conference call with analysts. That raised concern among analysts including William Tanona at Goldman Sachs that Lehman won't be able to repeat its better-than-expected performance in coming quarters.
Earnings `Quality'
``The quality appears less than optimal,'' Tanona, who rates Lehman ``neutral,'' said in a report to investors.
A lower-than-expected tax rate accounted for about 6 cents a share of the earnings beat, according to Merrill Lynch & Co. analyst Guy Moszkowski.
The earnings performance was ``not as good as it looks at first glance,'' UBS AG analyst Glenn Schorr, who recommends investors buy Lehman shares, said in a report.
Lehman's gross fourth-quarter writedown was $3.5 billion, O'Meara said. Residential mortgages and related assets accounted for $2.2 billion of that figure, and the rest came from commercial mortgages.
Lehman offset the losses with $2 billion it made on hedges, $320 million of gains from the sale of leveraged loans that were previously written down and a $320 million drop in the firm's liabilities, O'Meara said.
Writedown Totals
Those steps resulted in the $830 million revenue reduction, on top of the $700 million writedown the company reported last quarter.
Chief Financial Officer Erin Callan said on the conference call that debt markets would probably remain ``challenging'' in the first half of next year and further writedowns are likely.
``We're not trying to be too optimistic and we're not calling the bottom,'' Callan said in a conference call with analysts. ``We're trying not to be too concentrated in our risk for any asset class.''
Lehman executives said they used bets against ABX indexes, credit-default swaps and total-return swaps and other forms of hedging to protect against declines in mortgage-related assets.
Merrill, the third-largest U.S. securities firm, took an $8.4 billion writedown last quarter, and Morgan Stanley last month said it will report at least $3.7 billion of writedowns in the fourth quarter. Bear Stearns is writing down about $2 billion in the third and fourth quarters.
Limiting Losses
Lehman's investment-banking revenue fell 3 percent to $831 million, and fees from asset management increased 30 percent to $832 million.
The firm advised on 45 takeovers in the fourth quarter valued at $296.3 billion, more than three times what it handled a year earlier, according to data compiled by Bloomberg. It underwrote $24.8 billion of U.S. bonds in the quarter, down from $28.9 billion the previous year.
Lehman plans to eliminate 2,500 mortgage-related jobs and shut its subprime lending unit, BNC Mortgage LLC, after U.S. foreclosures rose to a record. BNC, which was making more than $2 billion of home loans a month last year, cut lending to $200 million a month before being closed.
Employee Ranks
Lehman had 28,556 employees as of Nov. 30, down from 28,783 at the end of the third quarter.
``This firm produced a respectable profit in a very difficult quarter,'' Credit Suisse Group analyst Susan Katzke said in a report today. Katzke, who rates the shares ``outperform,'' cut her profit estimate for 2008 by 50 cents to $7, citing a ``weaker economic outlook.''
Wall Street's biggest losses have come from collateralized debt obligations, which pool asset-backed securities according to varying degrees of default risk. Investors have become wary about even the CDOs that are supposed to have the least risk, driving prices down more than 70 percent. Lehman executives have said they don't own any CDOs that aren't fully hedged.
Lehman's so-called Level 3 assets, which are harder to value because market prices have become scarce, increased about $6 billion in the fourth quarter from the previous three months, O'Meara said on the conference call today. In the third quarter, the figure jumped 57 percent to $34.7 billion.
The ratio of Level 3 assets to total inventory rose to about 13 percent from 11 percent in the previous quarter, he said. While some of those were assets shifted from Level 2, where there are more market prices available, some were assets acquired during the period, he said.
The firm's subprime exposure was $5.3 billion at the end of the fourth quarter, O'Meara said, down from $6.3 billion in the previous period.
Dec. 13 (Bloomberg) -- Lehman Brothers Holdings Inc., the largest U.S. underwriter of mortgage-backed bonds, said earnings fell for a second straight quarter and losses from the collapse of the subprime market will extend into next year.
Fourth-quarter net income declined 12 percent to $886 million, or $1.54 a share, from $1 billion, or $1.72, a year earlier, the New York-based company said today in a statement. A drop in the value of mortgage-related securities and real-estate holdings cut revenue by $830 million. Lehman fell 3.1 percent on the New York Stock Exchange, less than Wall Street rivals.
Lehman's earnings exceeded analysts' estimates after revenue from trading stocks more than doubled, helped by private-equity gains and the firm's investment in hedge fund GLG Partners Inc. The board gave Chief Executive Officer Richard Fuld a $35 million stock award for the year as Lehman, the fourth-largest U.S. securities firm by market value, avoided the losses analysts predict Wall Street rivals Morgan Stanley and Bear Stearns Cos. will report next week.
``Lehman has seemed to limit its balance-sheet exposure to subprime, keeping the writedowns reasonable,'' said Benjamin Wallace, who helps manage $750 million at Grimes & Co. in Westborough, Massachusetts. ``They're still a big fixed-income player and that business will probably slow down further next year, so the share price isn't rewarding their performance yet.''
Lehman fell $1.89 to $59.93 in composite trading on the New York Stock Exchange at 12:49 p.m. The stock declined 21 percent this year through yesterday, compared with Morgan Stanley's 25 percent drop, Bear Stearns's 38 percent slide and Goldman Sachs Group Inc.'s 6.6 percent advance.
Revenue Decline
All four firms sank today on concern a Federal Reserve plan to provide financial companies with as much as $64 billion is failing to boost lending.
Lehman's fourth-quarter revenue fell 3 percent to $4.39 billion, with a record 62 percent coming from non-U.S. businesses. Return on equity decreased to 16.6 percent from 22.3 percent a year earlier. The company has reported two consecutive quarters of declining profits for the first time in five years, though earnings for the full year were a record $4.2 billion.
While fixed-income trading revenue declined 60 percent to $860 million in the quarter, equity trading more than doubled to $1.9 billion.
The GLG transaction contributed about $500 million in revenue for the quarter, risk management head Christopher O'Meara said on a conference call with analysts. That raised concern among analysts including William Tanona at Goldman Sachs that Lehman won't be able to repeat its better-than-expected performance in coming quarters.
Earnings `Quality'
``The quality appears less than optimal,'' Tanona, who rates Lehman ``neutral,'' said in a report to investors.
A lower-than-expected tax rate accounted for about 6 cents a share of the earnings beat, according to Merrill Lynch & Co. analyst Guy Moszkowski.
The earnings performance was ``not as good as it looks at first glance,'' UBS AG analyst Glenn Schorr, who recommends investors buy Lehman shares, said in a report.
Lehman's gross fourth-quarter writedown was $3.5 billion, O'Meara said. Residential mortgages and related assets accounted for $2.2 billion of that figure, and the rest came from commercial mortgages.
Lehman offset the losses with $2 billion it made on hedges, $320 million of gains from the sale of leveraged loans that were previously written down and a $320 million drop in the firm's liabilities, O'Meara said.
Writedown Totals
Those steps resulted in the $830 million revenue reduction, on top of the $700 million writedown the company reported last quarter.
Chief Financial Officer Erin Callan said on the conference call that debt markets would probably remain ``challenging'' in the first half of next year and further writedowns are likely.
``We're not trying to be too optimistic and we're not calling the bottom,'' Callan said in a conference call with analysts. ``We're trying not to be too concentrated in our risk for any asset class.''
Lehman executives said they used bets against ABX indexes, credit-default swaps and total-return swaps and other forms of hedging to protect against declines in mortgage-related assets.
Merrill, the third-largest U.S. securities firm, took an $8.4 billion writedown last quarter, and Morgan Stanley last month said it will report at least $3.7 billion of writedowns in the fourth quarter. Bear Stearns is writing down about $2 billion in the third and fourth quarters.
Limiting Losses
Lehman's investment-banking revenue fell 3 percent to $831 million, and fees from asset management increased 30 percent to $832 million.
The firm advised on 45 takeovers in the fourth quarter valued at $296.3 billion, more than three times what it handled a year earlier, according to data compiled by Bloomberg. It underwrote $24.8 billion of U.S. bonds in the quarter, down from $28.9 billion the previous year.
Lehman plans to eliminate 2,500 mortgage-related jobs and shut its subprime lending unit, BNC Mortgage LLC, after U.S. foreclosures rose to a record. BNC, which was making more than $2 billion of home loans a month last year, cut lending to $200 million a month before being closed.
Employee Ranks
Lehman had 28,556 employees as of Nov. 30, down from 28,783 at the end of the third quarter.
``This firm produced a respectable profit in a very difficult quarter,'' Credit Suisse Group analyst Susan Katzke said in a report today. Katzke, who rates the shares ``outperform,'' cut her profit estimate for 2008 by 50 cents to $7, citing a ``weaker economic outlook.''
Wall Street's biggest losses have come from collateralized debt obligations, which pool asset-backed securities according to varying degrees of default risk. Investors have become wary about even the CDOs that are supposed to have the least risk, driving prices down more than 70 percent. Lehman executives have said they don't own any CDOs that aren't fully hedged.
Lehman's so-called Level 3 assets, which are harder to value because market prices have become scarce, increased about $6 billion in the fourth quarter from the previous three months, O'Meara said on the conference call today. In the third quarter, the figure jumped 57 percent to $34.7 billion.
The ratio of Level 3 assets to total inventory rose to about 13 percent from 11 percent in the previous quarter, he said. While some of those were assets shifted from Level 2, where there are more market prices available, some were assets acquired during the period, he said.
The firm's subprime exposure was $5.3 billion at the end of the fourth quarter, O'Meara said, down from $6.3 billion in the previous period.
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