raman 's Blog

Bear Stearns: is that bail-out, or "plunger protection" working the market as a whole ?

2008-03-17T06:19:10Z

A forced marriage by the FED

FED must stop the chain reaction before it happens or almost every major finanical institute would face a severe counter party risk based write down(much more uglier than sub-prime).

cheap load(arranged friday) to BSC is useless too as no one would think that is enough and the run would continue and BSC would be forced to file chapter 11.

So they need some big guys to boost the confidence, i.e. JPM.

JPM doesn't really want it or else what would be the difference between 1.28B(that is more likely to be approved quickly by the share holders) vs 286M when they said it can make 1B/year after the completion and cleaning up the mess ? beside, it is not cash but printing more certs. A bit more dilution but worth it if they really want it so badly.

BSC's management doesn't want to give in yet or else they can play hard with the 'I am going to drag everyone down if I don't get say 12/share' trick. As they have depleted all the cash anyway so even their client want to draw money, they have still to wait for the liquidation(to find out what money belongs to whom). A no loss situation for the management(other employee must go immediately though) if they think 10/share is the max they can get(I believe the book is already negative).

the deal sounds more like a 'convertable note' style credit line to me where JPM+FED gives the backing to BSC for 12 months and they hope the situation(the so called dislocation in bond market) would improve and by that time, BSC has unwinded its huge position and have a positive book value and its share holders would reject the deal. And in the meantime, expect the reject it again and again(the agreement is very strange/smelly to allow the share holders to do this)

If that doesn't work, they would take it in and the 1B would be sort of a premium they received, to reduce the risk a bit.

Now whether this would work is beyond anyone's guess since it can send a signal of 'if BSC worth 2/share, how about LEH/GS/MER etc' ? We are already seeing LEH being punished, the next target may be.

I was thinking that the FED would broker a deal in the 30-50 range(forget whether BSC does worth that much as it doesn't matter) that would boost the overall confidence and buy the market some more time. May be they are playing a 'shock and awe' trick hoping a capitulation style bottoming.

mortgage crisis: bad phase of the bottoming of the real estate

2008-02-26T01:16:32Z

Correction Appended

An investigation into the mortgage crisis by New York State prosecutors is now focusing on whether Wall Street banks withheld crucial information about the risks posed by investments linked to subprime loans.

Reports commissioned by the banks raised red flags about high-risk loans known as exceptions, which failed to meet even the lax credit standards of subprime mortgage companies and the Wall Street firms. But the banks did not disclose the details of these reports to credit-rating agencies or investors.

The inquiry, which was opened last summer by New York's attorney general, Andrew M. Cuomo, centers on how the banks bundled billions of dollars of exception loans and other subprime debt into complex mortgage investments, according to people with knowledge of the matter. Charges could be filed in coming weeks.

what does the GOVERNATOR wants ?

2008-02-18T20:56:30Z

Here in California Gov. Arnold Schwarzenegger wants Congress to raise the Fannie Mae and Freddie Mac lending

limit from $417,000 to at least $625,000 as part of the economic stimulus package. State Assemblyman Ted

Lieu is pushing for a bill that requires mortgage lenders to tighten up already strict guidelines to make sure

homebuyers can afford their basic monthly bills before qualifying for a mortgage loan. This bill would also ban

certain designer mortgage loans such as the option arm mortgage. The option arm mortgage, also known as the

pay option arm, allows borrowers to pay less than the interest that is due by adding the unpaid interest to the

balance of the mortgage loan. The bill would also allow some homeowners to refinance their homes without

being responsible for any penalties or unnecessary fees.

fannie mae to bring up the conforming limit ???

2008-02-18T20:54:52Z

Now what? Frankly, analysts feel that enactment is possible by mid-February but looks more likely by early March. No large investors will make any policy changes or announcements until the issues are less confusing, or even voted into law. Apparently, the bill would temporarily increase the limit on mortgages Fannie Mae and Freddie Mac may securitize from $417k to up to $730k. In addition, the bill would increase the limit on loans the Federal Housing Administration (FHA) may insure from $362k to $625k. This should help to reduce spreads in the jumbo mortgage market! One estimate mentioned that as many as $400-500 billion in loans could qualify for refinancing. As these loans refinance, it could ease pressure on capital-constrained bank balance sheets. And "temporary" items like this are difficult to rescind after a year, which would also be good news for originators.

did they raise the conforming limits or not? And mortgage rates continue to worsen

2008-02-18T20:53:29Z

As part of the economic stimulus package, an increase in the conforming limit could now be a reality, at least for

a brief period. Congress and President Bush agreed, but have not voted yet, on a 1-yr increase in the

conforming loan limit to $730K. There is not a lot of detail yet (there is confusion as to whether the $730K, or

$725, is for high cost housing areas, or everywhere, and just what high cost areas are?). Just when mortgage

originators everywhere were breaking out the Cold Duck, OFHEO's director James Lockhart (Office of Federal

Housing Enterprise Oversight, who oversees FNMA & FHLMC) issued a statement saying "We are very

disappointed in the proposal to increase the conforming loan limit as we believe it is a mistake to do so in the

absence of comprehensive GSE regulatory reform. To restore confidence in the markets we must ensure that the

GSEs' regulator has all the necessary safety and soundness tools. Yesterday Chairman Dodd talked about

moving a GSE reform bill early this year. We are ready to work with him and the Senate Banking Committee.

We will also be working with Fannie Mae and Freddie Mac to ensure that any increase in the conforming loan limit

moves through their rigorous new product approval process quickly and has appropriate risk management

policies and capital in place."

want to buy foreclosure properties, here are some websites

2007-09-02T15:50:59Z

Psssst... wanna buy a foreclosed property? After a default and after the house does not sell at the Trustee Sale,

the bank/lender owns it. As most know, this is called "REO", for Real Estate Owned. Currently mortgage

companies continue selling their REO's through real estate agents, who list them on the MLS. You would probably

need to make an offer through an agent, but here are some sites which list the properties:

http://www.countrywide.com/purchase/f_reo.asp

http://www.downeysavings.com/ffs/properties

http://www.pasreo.com/reo/ (Wells Fargo)

http://www.homesteps.com/hm01_1featuresearch.htm (Freddie Mac)

http://www.mortgagecontent.net/reoSearchApplication/fanniemae/reoSearch.jsp (Fannie Mae)

orange county foreclosure" "blood bath"

2007-09-02T15:41:28Z

Is the term "blood bath" over-used and lost its impact? "It's a blood bath," said a VP at PIMCO about the

current market conditions. Yes, rates have crept up. Yes, property values have gone down in some over-inflated,

speculative areas of the nation, and the national median home price may have its first annual decline since the

1930's. Yes, some portions of the economy are slower than others: confidence among homebuilders fell in June

to the lowest since February 1991, according to the National Association of Home Builders/Wells Fargo index. But

overall consumer confidence is stable, rates are still low by historical standards, and property values in many

parts of the US are constant or rising.

Speaking of which, in a move that surprised no one and didn't move the markets too much yesterday, the

Federal Open Market Committee (FOMC) decided to keep its target for the federal funds rate at 5.25%.

Economic growth is "moderate", despite the housing market, and the Fed feels that the economy seems likely to

continue to expand at a moderate pace. So, growth is rebounding after a slowdown earlier in the year, while

inflation has eased from its level in February, which matched a four-year high, and rates are on hold. We started

off with a 10-yr yielding 5.09% this morning, and after Personal Income (+.4%) and Personal Consumption

(+.5%) were released, it went to 5.07%. Mortgage prices are a touch better. Ahead of us we still have the

Chicago Purchasing Manager's survey, Construction Spending, and the Michigan Consumer Sentiment survey.

junk mortgage bond

2007-09-02T15:38:47Z

But possibly the bigger news is that S&P said that it would change its methodology for ratings hundreds of

billions of dollars in residential mortgage-backed securities, and review its ratings on hundreds of billions of

dollars in the more complex collateralized debt obligations based on those subprime loans. It is expected that a

lot of debt will be downgraded to junk status and may have to be sold at fire-sale prices. Therefore many

pension and hedge funds that once thrived on the high returns they could get from investing in subprime junk

are expected to lose a lot of money. The effects of the US market shock have been felt around the world with

German and Japanese debt markets rallying from the news and expectations for a Fed overnight rate cut this

year have moved back up to 22%.

Lastly, FHLMC forecast that U.S. home sales in 2007 will decline to their lowest since the start of the five-year

housing boom in 2001 as mortgage rates and foreclosures increase. Are we having fun yet?

What are mortgage brokers doing to decrease the number of loan repurchase requests? Although this isn't much

of a surprise, according to a poll by Inside Mortgage Finance, 63% are now using automatic desktop underwriting

systems, 60% are doing VOE's, and most others have beefed up verifications, credit checks, documentation, and

quality control measures.

loan originators how much you made last year

2007-09-02T15:35:56Z

How much did you make last year? (That was a rhetorical question.) The president of Countrywide earned $48

million, the president of Freddie Mac $15 million, WAMU $8 million, Indy Mac $4 million.

According to Goldman Sachs and Wells Fargo, jobless subprime mortgage lenders are looking for employment in

the booming market for loans to senior citizens. So far the mortgage industry has lost 15,000 employees, and

obviously some will enter the growing market for reverse mortgages. Some bankers worry the market's rapid

growth may make reverse mortgages vulnerable to fraud and increased litigation, which has plagued subprime

loans. "As you look at what's going on in the subprime market, are those the types of folks who are really

appropriate for pursuing reverse mortgages?" asked Rolf Edwards, a vice president at Goldman, Sachs & Co. in

New York. The number of federally insured reverse mortgages has skyrocketed, climbing to 76,351 in 2006 from

7,781 in 2001. So-called HECM loans, or Home Equity Conversion Mortgages, make up 90% of them, according

to the National Reverse Mortgage Lenders Association. In another sign of growth, Bank of America Corp. in April

said it agreed to buy the reverse mortgage business of Seattle Mortgage Co., making it the third-largest U.S.

provider. IndyMac Bancorp Inc. is the industry leader. At Wells Fargo, for example, about 700 loan officers

specialize in reverse mortgages.

they would pay their credit card first, before their mortgage payment

2007-09-02T15:31:27Z

In a surprising survey (very surprising?) released last week, Experian showed that data indicates that many

subprime borrowers are paying off their credit card bills before their mortgage payment! Do they think that they

don't have much to lose by not paying their mortgage? Are their credit cards more important? Prime borrowers,

by the way, haven't changed: they are still less likely to be late on their mortgage than on their credit cards.

Check out: http://www.businessweek.com/bwdaily/dnflash/content/jun2007/db20070620_271294.htm

Facing Foreclosure in California?...Call for help

2007-08-26T19:12:12Z

Facing Foreclosure in California?...Call for help

Kandola Mortgage Services launched a Foreclosure Hotline this week. It's purpose is to assist people who are delinquent on the mortgages. Counselors will act as intermediaries between homeowners and lenders, to work out a game plan, help organize finances, avoid scams, reduce potential liability and possible sell or keep the home.

If you are delinquent on your mortgage payments, please call for help. The number is 1-408-561-7295.

Irony in action

Foreclosures cost the taxpayer in the end

A study done by the University of Colorado-Denver last year found on average one foreclosure costs the municipality $10,000 per home.

Foreclosures drive down property values. Empty homes attract additional problems, they become playgrounds for kids who often times destroy the home, costing the lender more to bring it up to salable condition. Some empty homes become meth labs, creating worse dangers yet.

What's a neighbor to do about foreclosures?

If you are in foreclosure, give us a call ?

raman kandola

vice-president

kandola mortgage services

www.kandolamortgage.com

408.561.7295

408.561.9967

Neighbors can help the community by watching vacant homes for unusual activity. If you see something out of the ordinary happening in a vacant home take it upon yourself to contact the authorities. Being a watchdog for the neighborhood will help solve the problem is less time. It's not a question of being a nosey neighbor but one of responsibility and pride. Protect your neighborhood and your property values.

www.kandolamortgage.com

greenpoint is gone too.. check the link below

2007-08-20T16:35:29Z

Capital One Closes Wholesale Mortgage Unit

Revises 2007 EPS guidance down by $2.15 per share; expects 2007 EPS of approximately $5.00 per shareMCLEAN, Va., Aug 20, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Capital One Financial Corporation (NYSE: COF) today announced that it will cease residential mortgage origination operations at its wholesale mortgage banking unit, GreenPoint Mortgage, effective immediately. Current conditions in the secondary mortgage markets create significant near-term profitability challenges, given the company's "originate and sell" business model. Further, recent and continuing developments in the mortgage markets reduce the long- term outlook for profitability in the business, as the company expects markets for prime, non-conforming mortgage products are likely to remain challenged for the foreseeable future. GreenPoint Mortgage will cease making new loan commitments immediately, however, it will continue to meet its contractual obligations to customers for loan commitments that are in the pipeline with rates locked.

The company estimated that the total after-tax charge associated with this closure will be approximately $860 million, or $2.15 per share, the vast majority of which is expected to be incurred in 2007. Approximately $650 million of these expenses result from the non-cash write-down of goodwill associated with the acquisition of GreenPoint Mortgage as part of the North Fork Bancorporation in December 2006. The remaining $210 million of after-tax charges includes approximately $100 million in after-tax restructuring charges associated with severance benefits and facilities closure, and approximately $110 million after-tax valuation adjustments related to ongoing operations in the third quarter.

As a result of the expected charges, the company is revising 2007 earnings guidance down by $2.15 per share (diluted). The company now expects 2007 earnings of approximately $5.00 per share (diluted). Without the charges related to the mortgage banking business, the company would have maintained its existing earnings guidance. Capital One's other businesses remain on a solid trajectory, with revenue growth and credit performance in line with expectations.

"The reductions in demand and pricing in the secondary mortgage markets make it difficult to operate our wholesale mortgage banking business profitably," said Gary Perlin, Capital One's Chief Financial Officer. "Beyond that, Capital One's other businesses are supported by ample liquidity and funding including deep access to deposits, a "stockpile" of subordinated credit card funding in place that allows approximately $9 billion of AAA credit card funding going forward, and a $25 billion portfolio of highly liquid securities."

GreenPoint Mortgage became a subsidiary of Capital One in December 2006, as part of the company's acquisition of North Fork Bancorporation. GreenPoint's focus had long been the prime non-conforming and near-prime markets, especially the Alt-A mortgage sector.

trump is gone are you next

2007-08-19T02:11:28Z

Less than two years after its launch, Trump Mortgage is gone, due to the market and the disclosure that the

firm's chief executive, E.J. Ridings, had inflated his credentials, the outfit never came close to reaching its

financial goals. Donald Trump said that it was just a "licensing deal" and he didn't have an ownership stake.

Trump is, however, licensing his name to First Meridian Mortgage, a lender that is being renamed "Trump

Financial".

another guideline change: sub prime meltdown

2007-08-19T02:08:21Z

Bear Stearns changed their product offerings on Friday. They suspended "No Ratio", NIVA, and "No Doc", all second home and investment loans, and their "No MI" programs.

Citi (at the risk of possibly repeating myself) is discontinuing the following programs: for Prime Lending, NIVA & NINA for Non-Agency Alt A, "Home on Time" (I guess they're going to be late...), and CRA Stated Income. Under the Expanded Lending (Non-Prime), they've discontinued Expanded Lending First Lien Stated Income Documentation Process and Expanded Lending Second Lien Programs.

Countrywide made several guideline changes, effective today. For their HELOC's they reduced the CLTV's and loan amounts, and increased minimum credit scores. Along the same lines, for their Fast & Easy, Non-conforming, Expanded, and Alt-A programs, changes included reductions in LTV and CLTV, and increases in credit scores.

Nat City Correspondent Lending has suspended all new registrations and locks under both the Standard and Select Extended Capped Rate programs until further notice.

RFC's warehouse bank is rumored to be making changes to their advance rates on 2nd liens and pay option loans to investors besides GMAC/RFC, lowering them to as low as 50%.

On Friday, Impac Mortgage pre-announced a loss of $152.5 million, and that filing of its 2Q07 10-Q has been delayed as a result of "recent volatility and disruptions in the mortgage and secondary markets and integration and analysis of the financial information from its May 2007 acquisition of certain assets and liabilities".

arm to blow out ! foreclosure to come out .. every where.

2007-08-19T02:06:01Z

lender rumour/ lender crisis

2007-08-19T02:04:25Z

Countrywide said that "disruptions in credit and secondary mortgage markets pose a risk to the company and could hurt its financial condition in the short-term". CW made the disclosure in a filing with the Securities and Exchange Commission, supplementing other "risk factors" the company had outlined in its annual report. Payments were at least 30 days late on about 20% of "nonprime" mortgages serviced by Countrywide as of June 30, up from 14% a year earlier. For all loans, delinquencies were 5%, up from 3.9%.
WAMU's wholesale channel is either formally or informally classifying smaller originators as "priority" or "non-priority" accounts. There are obvious differences in service levels, depending on where you fit in.
WAMU warehouse is implementing changes as to the types of loans and the warehouse advance amount for warehousing. The maximum non-conforming market value that WAMU will accept is 97 for non-conforming and non-government loans! All non-conforming loans must have a specific takeout commitment for each loan. WAMU will no longer warehouse the following types of non-conforming mortgages: second lien mortgages, non-owner occupied mortgages, NINA/NINR, SISA's, mortgages with CLTVs greater than 90%, or mortgages with FICO scores less than 660.
Paul Financial has suspended their Equity Advantage program due to the continuing illiquid bond market.
The Bank of Walnut Creek ceased taking applications and funding loans.
According to the National Mortgage News, Investment banker Nomura Securities has closed its nonconforming mortgage conduit and laid off staff in its fixed-income research department.
Nat City is making the changes to the Non-Conforming price adjustments: FICO's less than 660 now have a 5 point hit, FICO's 660-679 are a 1 point hit, etc., and the following non-conforming products will be discontinued: "Follow the Findings", 40 year terms, and 40 due in 30's. Lock extensions under these products will not be permitted.
Anworth Mortgage Asset Corp. announced that its Belvedere subsidiary was in default on two of its repo lines and had unpaid margin calls on others, and analysts assume that the company will lose 100% of this amount.
NovaStar Financial posted a net loss of $52.9 million, compared with a profit of $34.7 million a year earlier. Loan volume fell 73% to $773.7 million, and the real estate investment trust said it is having more difficulty selling loans it makes.
CitiMortgage improved prices from 50-100 basis points on the non-agency Alt-A, ARM, and Jumbo fixed.
Bank of America announced that they were limiting the maximum LTV/CLTV for all Cash-Out Refinance and all Non-Owner Occupied (Investor) transactions is limited to 70% on SIVA, SISA, Stated Income Combo Home Equity Loan Program, NINA, and their "No Ratio loan" programs. In addition, all new registrations and locks for LTV/CLTV greater than 70% for Investment Property and Cash Out Refinances on these programs have been suspended.
Deutsche Bank/CLG announced that MortgageIT is closings its correspondent division and moving that function to wholesale.

meltdown lenders: higher standard guidelines

2007-08-19T02:00:58Z

RFC changed their Jumbo A, Expanded Criteria, and Payment Option pricing adjustments.

WAMU ceased doing any low-doc transactions whatsoever with FICO's less than 680 and LTV's greater than 65%.

MortgageIT discontinued their No Ratio, No Doc, and SISA loans for several of their products.

Greenpoint stopped taking locks entirely on their Alt-A Fixed and ARM products.

Wells Fargo worsened their Jumbo prices by 1 point and capped them at 100.00 (0 points rebate).

Countrywide changed their guidelines and pricing adjustments for their Expanded and Jumbo product lines.

Deutsche Bank (who owns MortgageIT), closed their lock desk entirely.

Indymac closed their bulk (conduit) desk.

Taylor Bean and CSFB are no longer doing 2^nd mortgages. Taylor also scaled back their f irst lien, Alt-A Fixed, Hybrid ARM and Option ARM programs.

Astoria Bank tightened their guidelines and engaged in a mid-day price change on their ARM's for the worse, in spite of a nice improvement in A-paper product.

CitiMortgage changed their pricing adjustments for non-agency ARM loans, and also changed the pricing structure for SIVA, NINA, and several other types of loans.

where is the juice in the market />?

2007-08-17T02:59:28Z

Housing creates a lot of ancillary economic activity and jobs: some say that housing and related industries

account for almost 25% of gross domestic product! Companies that make anything that goes into a home, all

the wiring, plumbing, anything related to coatings and fixtures, will certainly be suffering, along with shopper's

savings if the value of their home declines. What about builders? There are many issues that have sprung up.

Most builders weren't able to stockpile as much cash as expected, partly because they have had to keep building

large housing developments, even though demand dropped off sharply: once you start putting in the plumbing

hookups and the roads, you can't abandon these projects halfway. The sharp drop in sales and home prices

obviously haven't helped, nor have the large incentives for buyers. Builders own too much land, in spite of trying

to protect themselves by using options to secure land, but as it turns out, some builders still ended up owning

too much land: several years' worth. Diversifying geographically across the nation hasn't helped, as much of the

builders' profits came from the markets hardest-hit by the recession.

loan standards are higher, new squeeze for a foreclosure rise.

2007-08-17T02:57:22Z

The most negative analysts believe that because loan standards are now much tougher, at least 10% to 15% of

the people who could have qualified for a home-purchase loan last year can't do so now. Meanwhile, many of the

people who would still qualify for a loan don't want to buy a house now because they think prices will fall further.

So the housing market is likely to remain weak for at least another couple of years, they believe. One reason is

that it takes time to absorb all the houses and condos waiting for buyers. The NAR counts about 4.2 million

resale homes for sale, along with more than 500,000 new homes on the market. That is enough to last about

8½ months at the recent sales rate; a supply of five to six months generally is considered balanced.

firesale sub prime lenders >? they are on fire

2007-08-16T17:42:05Z

Among the 20 largest subprime lenders in 2006 ranked by Inside Mortgage Finance more than half have tried to

sell themselves or left the business. The list includes companies that may have offered subprime, prime or

Alternative-A loans. Some of the most recent developments: American Home Mortgage stopped making loans

after investment banks cut off credit lines, GE plans to sell WMC Mortgage, CIT Group Inc., the largest

independent commercial finance company in the U.S., said it's getting out of home lending, MGIC Investment

Corp. and Radian Group Inc. said their stakes in C-BASS, valued at more than $1 billion in June, may now be

worthless, FBR agreed to sell its subprime mortgage business First NLC (who just laid off hundreds of

employees) to Sun Capital Partners, and Alliance Mortgage and Premier Mortgage filed bankruptcy petitions.

Accredited Home Lenders, San Diego, said Thursday that it may not continue to operate as a "going concern,"

sending its stock price down 25% to just over $6 a share. According to the Quarterly Data Report, Accredited is

the nation's 18th-largest subprime funder. The company cited deteriorating conditions in the market, including

rising delinquencies and early payment defaults. During the first five months of the year it repurchased $152

million in loans and paid out an additional $39 million in cash to investors to settle loan repurchase-related

demands.

another one of them ...

2007-08-16T17:38:46Z

Credit-Based Asset Servicing and Securitization LLC (C-BASS), a New York-based subprime loan company, said

it's in talks with investors to ensure it has sufficient funds. Mortgage insurers MGIC Investment Corp. and Radian

Group Inc. yesterday said their C-Bass joint venture may be worthless, requiring more than $1 billion in write

downs. Ouch. "The current severe state of disruption in the credit markets has caused C-Bass to be subject to an

unprecedented amount of margin calls from our lenders," C-Bass said today in a statement on Market Wire. C-

Bass buys mortgages with overdue payments, aiming to improve collection rates before selling packages of the

debt at a profit. "I'm surprised," said Mark Patterson, a managing director at Los Angeles-based NWQ

Investment Management, who may win the "Naïve person of the year" award.

notice from first magnus

2007-08-16T17:36:55Z

IMPORTANT NOTICE:

FIRST MAGNUS IS NO LONGER FUNDING ANY MORTGAGE LOANS

In light of the collapse of the secondary mortgage market, First Magnus will not fund any future mortgage loans, and is no longer accepting any mortgage loan applications or funding any mortgage loans previously originated and not yet funded. We explored all options before taking this action but were left with no viable alternative.

First Magnus values the relationships we have formed with all of our broker partners over the years and appreciate the trust you have shown in us. We are saddened that we will no longer have the opportunity to work with you.

For information about loans already submitted to First Magnus, please call 520.618.9000.

Credit problem: expensive loan

2007-08-15T01:04:22Z

Credit (borrowing) has become scarcer, rather than simply more expensive, which could affect the real economy

in at least three ways. It could make the already large overhang of unoccupied housing worse, curb consumer

spending, and constrain capital spending and hiring by firms that depend on external financing. And then what?

Will this housing problem infect other parts of the economy? The "wealth effect" that housing in the past has

brought us is almost gone in many parts of the country. Home equity helped the consumer stay ahead of the

game but that has been stripped for the most part. The number of eligible borrowers has dropped while the

amount of homes available has significantly increased. Many consumers are struggling to make ends meet

especially with the cost of energy and food soaring, and if they're spending $60 to fill up their SUV twice a week

there is less money for restaurant meals or the new Sony Playstation.

lender rumour/ subprime trouble

2007-08-15T01:02:08Z

One industry expert called the Alt-A market "wambly"*, and rumors are rampant about warehouse lenders

putting restrictions on originators selling loans to companies like American Home and Indy Mac. Last week we

had Wells Fargo shutting its nonprime wholesale lending business, laying off 144 workers and reassigning

another 70, but will continue to originate subprime loans directly to consumers through its retail channel.

Countrywide had their third straight quarterly decline in earnings. HSBC announced that it is bracing itself against

$9 billion in adjustable-rate mortgages that are about to reset and earlier this year upped its loan-loss reserves

by $1.7 billion to cover exposure to the subprime mortgage market. IndyMac, rumored to be the target of

warehouse lender restrictions, said it was "likely there will be some further staffing realignment later this year

and into 2008 (after laying off 400 employees a few weeks ago). GMAC Financial Services said second-quarter

profits fell 63%, and blamed the drop on losses in its Residential Capital LLC home lending unit. The unit lost

$254 million during the second quarter versus a profit of $548 million a year earlier. GMAC's exposure to the

subprime mortgage market caused the company to post a $305 million net loss during this year's first quarter,

including a $910 million loss at the ResCap unit. Don't shoot the messenger...

borrowers with subprime loans are in foreclosure

2007-08-15T00:59:26Z

Borrowers with subprime loans are now ending up in foreclosure twice as often as borrowers with FHA-insured

loans, said Brian D. Montgomery, assistant secretary for housing and the federal housing commissioner for HUD.

Of the 10 states with the highest percentage of FHA-insured loans, only three (Texas, Indiana and Utah) also

rank among the top 10 for foreclosures, new federal data show. The FHA's current strong position follows a sharp

dip in its market share. Between 1996 and 2006, the FHA's share dropped 25 percentage points, from 32% to

7%, among minority borrowers, the same class of borrower that (according to the Center for Responsible

Lending) provided the single-largest rush into the subprime mortgage market. The GAO report linked the drop in

FHA's share of the overall mortgage market to the popularity of adjustable-rate mortgages and other

unconventional loan products generally disallowed in the FHA program, and the hassle of filing the paperwork to

do an FHA loan. Many originators found the fees on interest-only and zero-down payment loans, which the FHA

won't insure, higher than with government loans. In an interesting footnote, the National Association of Mortgage

Brokers told GAO that many of its members couldn't afford to meet the FHA's financial requirements for brokers

writing FHA-insured loans: a brokerage business must have a minimum net worth of $63,000 and provide annual

audited financial statements.