Empiric Student Property Share Discussion Threads

[briarberry] 13/4/2007 17:29

US bankruptcy - no easy way out of debt for consumers...


"More financially stretched borrowers are realizing even declaring bankruptcy can't save their homes from foreclosure."

"According to a study released in March by Credit Suisse Group , more subprime borrowers are turning to bankruptcy court to stave off foreclosure, as softening housing prices make it harder for them to sell their homes to repay debts."

"At least part of the blame, says the report, lies with the bankruptcy law passed in October 2005. The law raised the bar for people to qualify for Chapter 7 "fresh start" bankruptcy proceedings. Chapter 7 can enable individual filers to wipe away debts such as credit-card and medical bills so they can continue to make their mortgage payments. With access limited, more subprime borrowers are forced into Chapter 13, where some can't maintain their payment schedules for more than a couple of months."

"'It's become harder to file for Chapter 7 to release debt burdens,' said Jay Guo, the lead author of the study. 'Going forward,' he added, 'delinquent loans are more likely to go into foreclosure directly rather than into bankruptcy,' resulting in higher losses for mortgage-bond investors."

[briarberry] 09/4/2007 19:09

Fed permanent add (free money), may be they're worried about the rise in TNX ?

[briarberry] 09/4/2007 17:26

US mortgages - liar loans


In testimony before the Federal Reserve, Steven Krystofiak, President of the Mortgage Brokers Association for Responsible Lending, says his group compared the income figures for 100 stated-income loans with IRS records. What did they find?

Ninety percent of the stated-income loan applications showed earnings that were exaggerated by at least 5 percent.

Almost 60 percent of the stated amounts were exaggerated by more than 50 percent.




Incidentally, agency prime mortgages made up 45% of mortgage originations in 2006, and 35% of those were low doc. Non agency jumbos made up 12% of the market, 50% of those were liar loans. Alt A made up 20% of the 2006 originations and 81% were stated. Subprime was 20% of originations and low doc was 50%.

[briarberry] 09/4/2007 00:08

Financials, some smaller companies coming clean... American Home Mortgage cuts profit forecast, but American Home isn't a subprime lender

During March, conditions in the secondary mortgage and mortgage securities markets changed sharply. In particular, these markets were characterized by far few buyers offering materially lower prices, both for loan pools and for "AA", "A", "BBB" and residual mortgage securities. These changes had a significant, adverse impact on our Company's first quarter results, reducing our gain on sale revenue and causing mark-to- market losses in our portfolio.


= banks didn't bounce much, still lagging, maybe they will bounce but credit bubble theory suggests they should be leading

[briarberry] 06/4/2007 14:43

SPX, I guess it could hold up for a couple more months, feel inclined to scale in end of year shorts into any rise, but not made my mind up yet ?


Unemployment Rate Drops in March As Companies Add 180,000 Jobs

Average hourly earnings rose to $17.22 in March, a 0.3 percent increase from February. Over the last 12 months, wages grew by 4 percent.

= continuing signs of inflation - no rate cuts to save the credit bubble



= the good news will lower the short count

[briarberry] 05/4/2007 18:39

New Century collapse sends shockwaves across the biggest lenders on Wall Street

Goldman Sachs has emerged as the single biggest creditor of New Century, the American sub-prime mortgage lender, which filed for Chapter 11 bankruptcy last night, after writing $60 billion (£30.4 billion) of American home loans.

The creditors' list is a who's who of Wall Street bankers, with Credit Suisse at No 2, Morgan Stanley at No 4 and Deutsche Bank, Bank of America, UBS and Lehman brothers also in the top ten.

Worryingly for the health of the entire US sub-prime market, Countrywide Financial, another sub-prime lender, is the No 10 creditor.


(they're still trying to say that they didn't lose any money - sold all the debt to Asian investors etc)

Barclays said: "The vast majority of our exposure to all US sub-prime lenders is fully collateralised and short-term, pending distribution. We do not anticipate any material losses to arise from our exposure to the sector."

[briarberry] 05/4/2007 11:07

US payrolls, should see a big rise in construction worker layoffs, and related industries, over the next few months.

The number of houses being built is still very high, whereas the number of starts has fallen steeply.




Nouriel Roubini, economics professor at New York University, says the housing bust is slowly pulling America into recession. He cites a 14.4pc drop in housing starts last month; an expected loss of 600,000 real estate jobs in 2007; a sharp fall in home equity withdrawals - down from 6pc of GDP at the top of the boom; and a squeeze as $1,000bn of mortgages are adjusted upwards this year to higher interest rates.

[briarberry] 01/4/2007 18:08

US inflation, the Yuan has risen 3.5% against the US$ in the last 12 months

that's potentially 3.5% of imported price inflation

[briarberry] 01/4/2007 16:58

Business investment (capex) is falling, another strong sign of recession...

[briarberry] 01/4/2007 16:38

US recession - it looks like from June onwards things will get a lot worse

The housing slump looks like it's turning into a bust, especially as ARM resets will peak this summer. That will effect MEW, and that will effect retail sales and employment. That will effect Asian vendor financing as they'll have less dollars to recycle. That will effect the dollar, which will be +ve for the Yen and hence curtail the carry trade

If the USA had been honest over the years and included house price inflation in their hedonic inflation figures, inflation would be reported as being a lot higher and therefore GDP as being lower, therefore US GDP is probably actually -ve now already.

[briarberry] 01/4/2007 15:48

US corporate profit growth - about to turn -ve ? 2007 Q1 reporting just starting

In 2006 Q4, a 15.9% profit increase from US corporations abroad & a 4.3% increase from domestic financial corporations has kept overall US corporate profit growth flat (Q over Q) otherwise profit growth would have turned -ve

US corporations are most likely borrowing money to buy their own shares back. This is +ve for the stock market in the short term (obviously irresponsible in the long term).




Banks, loan loss reserves are still at a record low, while the proportion of mortgage related assets vs total credit, held by banks, is at a record high. I guess this makes bank profits very sensitive to a housing bust ?

[briarberry] 01/4/2007 15:07

Excerpts from WSJ. - a rush to both issue bonds and to buy them


Sales of Corporates Set Record Companies Hurry To Market in Case Low Rates Vanish

By MARINE COLE

Investment-grade corporate borrowers tapped the U.S. bond market at record levels in the first quarter.

Companies sold $253.8 billion of new bonds as of Wednesday, according to Thomson Financial, and more than $5 billion of new notes were announced yesterday from such borrowers as Verizon Communications Inc., Wal-Mart Stores Inc. and French bank Société Générale.

The bulk of the new bonds in the first quarter, more than $100 billion, were sold in March, even with rising uncertainty about the state of the economy and increasing problems with risky subprime mortgage loans.

"This has been an impressive month in terms of issuance volume given all the negative karma in the financial markets," said Edward Marrinan, managing director of North American credit strategy at J.P. Morgan.

[briarberry] 31/3/2007 20:02

Housing Slump Erodes Budget Gains From Florida to California

March 29 (Bloomberg) -- Florida's tax receipts are falling for the first time since 1975 as a slump in construction and home sales dims the economy of the Sunshine State.

In California, the most populous state with 36 million residents, a balanced budget that Governor Arnold Schwarzenegger forecast for the fiscal year starting July 1 may swing to a deficit as tax revenue trails estimates by $847 million.

[briarberry] 30/3/2007 18:00

PPT - Fed chairman, Ben Banky, in Wednesday's testimony before the Joint Economic Committee of Congress - said PPT have taken no action so far...


Senator Ron Paul asked if the Plunge Protection Team has met and acted in the last three months. Bernanke casually answered they might have had some discussion but no action regarding the stock market.

Senator Ron Paul asked if Congress could have access to minutes of the meetings, and the chairman said he is unaware of any minutes and his voice trailed away.

[briarberry] 28/3/2007 22:37

Michael Hudson speaking on real estate and the housing bubble, recorded last autumn - one or two interesting points...



(good if you're learning economics - not much use for trading)

[briarberry] 26/3/2007 18:06

Morgan Stanley - from posts 771 + 772 above

Morgan Stanley auctioning $2.48 billion in New Century loans


it gave them a chance to dump the bad loans :) I wonder how much they'll get ?

[briarberry] 25/3/2007 17:03

SPX I put a small short on

but I'm not feeling too confident about it, if it goes up Monday I might just take it off ?

put/call ratio has been high, and the end of the month is often bullish

just have to wait and see

[briarberry] 24/3/2007 21:49

Freddie Mac

Freddie Mac, still fixing weaknesses that came to light in 2003, yesterday issued its first timely annual report in five years, which showed that the giant mortgage funding company lost $480 million in the fourth quarter. That compared with a profit of $684 million in the comparable period a year earlier.

The loss was largely a reflection of declines in the value of financial instruments known as derivatives that Freddie Mac uses to hedge against movements in interest rates.

[briarberry] 23/3/2007 22:26

Weekend Matinee - Money As Debt - audio with cartoon illustrations...

Interesting but old news for people on here. They didn't explain the multiplier system that well. For people who are new to economics you'll probably be left with more questions than answers by the end :) :)

(press play)

(135mb - it works as an mp4 file (rename add .mp4) if you fish the file out of your Temporary Internet Files folder)

[ian56] 23/3/2007 00:06

Fed accused of subprime 'perfect storm'
By Eoin Callan, Edward Luce and Krishna Guha in Washington

Published: March 22 2007 18:50 | Last updated: March 22 2007 18:50

The Federal Reserve helped create a "perfect storm" in the US subprime mortgage market that could expose up to 2.2m more Americans to the threat of home repossession, Chris Dodd, chairman of the Senate Banking committee, said on Thursday.

Mr Dodd, who is also a Democratic party candidate for the 2008 presidential nomination, alleged that the Fed had failed in its oversight role at a time when the growth in high-risk "adjustable rate mortgages (ARM)" to risky borrowers was exploding.

In a tough interrogation of leading mortgage lenders and federal banking regulators, Mr Dodd also promised legislation to crack down on predatory lending in the US mortgage market, where a rising level of repayment delinquency has caused global market jitters over the past month.

Mr Dodd said that US regulators had relaxed guidelines on mortgage lending at precisely the point in 2004 and 2005 when the riskiest ARM loans – which impose initially light monthly payments that escalate rapidly at a later date – were growing most rapidly. This also coincided with the start of the Fed's consecutive 17-stage rise in US interest rates.

"Despite those warning signals .̴1;. . the leadership of the Federal Reserve seemed to encourage the development and use of ARMs that, today, are defaulting and going into foreclosure at record rates," he said.

Mr Dodd, who was supported by Richard Shelby, the senior Republican on the committee, also expressed frustration with the fact that the Fed had so far failed to issue promised new guidance that would tighten up controls on the $1,200bn subprime mortgage market.

An estimated 1m subprime borrowers will have their rates adjusted sharply upwards this year and another 800,000 next. Roger Cole, a senior Fed official, said the guidance would come out by May at the earliest. He conceded that the Fed could have done more.

Thursday's hearing could mark the start of a political backlash against the leading subprime mortgage lenders. Senior executives from four leading lenders – HSBC, Countrywide, WMC Mortgage, First Franklin – testified. Of those invited, only New Century, the largest subprime lender, failed to send a witness.

Mr Dodd said the lenders had engaged in "unconscionable and deceptive" practices. But he also admitted it would be hard to pass a stricter law.

Subprime lending reached a new peak last year at 22.3 per cent of total mortgage originations, driven by loans that offered homebuyers special teaser rates that surged during the life of the loan.

Copyright The Financial Times Limited 2007

[ian56] 22/3/2007 23:41

As the fractional reserve rate is 10%, what happens when more than 10% (say 20%) of loans fail?

Regards,
Ian

[briarberry] 22/3/2007 23:21

good summary from prudent bear


In analyzing potential Subprime Contagion Effects, we must begin with a critical question: Is the general backdrop characterized by soundness and stability or is it more a case of excess, weak debt structures, and general fragility. Again, subprime collapsed so abruptly because of the acute fragility associated with Ponzi Finance. Unfortunately, analysis of general mortgage market vulnerability leaves me quite uneasy.

The entire Mortgage Finance Bubble is today especially susceptible to Subprime Contagion Effects. For starters, lending standards should be expected to tightened significantly throughout the "Alt-A," "jumbo," and prime "exotic" mortgage marketplace. This will likely pose a greater dilemma than subprime restraint for vulnerable high-priced housing across the country, with all eyes on California. For years now, the "Golden State" has been at the epicenter of mortgage lending excesses. I suspect the state has also been the leader in mortgage fraud. Going forward, I fully expect California to lead the nation in Credit losses and mortgage/housing angst.

[ian56] 22/3/2007 19:30

Give the execs a chance to sell their options, then they can put the bad loans on the books for next Qtr.

Regards,
Ian