MUSING ABOUT MORTGAGES, LENDERS, REAL ESTATE, AND WELL KNOWN INSIDERS.

August 5, 2007.   News about sub-prime mortgages and other random thoughts.

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Unnamed lender says, Sub-prime - "only 80% LTV and no more."
Same unnamed lender says - "no more 100% sub-prime loans."               
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CTX says "Alt-A loans are history."                                                                                            
CTX says "sub-prime loans are going to FHA".

Comment:  Since FHA limits are generally below the average market price in many areas, it would seem to follow that homes priced higher than the FHA limits will face a shortage of mortgage availability and drive prices lower.

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CIT plans to exit the home mortgage market.
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William Donaldson - Former Chairman of the SEC, well known insider, believes that things are generally fine and that the fed needs to do nothing.  Mr. Donaldson, well know insider, is exhibiting those same talents he used when, as Chairman of the SEC. by doing nothing and leaving to Congress the Draconian cure for executive accountability of Sarbanes Oxley where the CEOs of public companies have to actually sign an acknowledgement that they have read the quarterly and annual statements of the public company of which they are the CEO. 

The SEC, led by Mr. Donaldson, well know insider, had statutory authority to enforce accurate disclosure, but failed to enforce the laws and left the matter to Congress to punish all present and future public companies with the requirement in the quarterly and, in annual disclosure statements, they be required to disclose when officers and board members used the executive bathrooms. 

Mr. Donaldson, well known insider, is of the opinion that Mr. Bernanke, another well known insider, will do
nothing to ease the credit crunch and that is probably the best thing to do since we are still about 6 months away from collapses of major banks and in 6-8 months, the fed can react to rather than pre-empt catastrophe.

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Senator Clinton, well known housing expert, will unveil a plan for curing the housing crisis.
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The consensus is that Bernanke will not ease today because that action would assist the housing market.  The commentators believe that Bernanke believes that, since many consumers still have houses, there is no reason to act now. 

The economy has slowed considerably and while a fed easing would give the economy a boost and help the housing sector on the road to recovery, easing a credit crunch in housing is not the step to take at this time because so far, the fallout has affected only a few mortgage companies and lenders.  Once the credit crunch begins to ripple through the economy to cause major banking failures, can anyone say HELOC?,
the fed will then ease rates after several major banks fail or lose major equity value.  Banks with major holdings in sub-prime portfolios will discount them to hedge funds to offset their loses.

Hey folks.  Guess who just dropped in. Jon Stewart, of The Daily Show is here to provide us with a short news brief:  Jon, take it away.  Enjoy. 

"National banks stock value will slide rapidly and, Senator Clinton, well know housing expert, will propose legislation to permit national banks to enter the real estate business through a repeal of the Gramm-Leach-Bliley Act.  Sen. Clinton said on the floor of the Senate, "We need to cure the malaise in the housing industry by permitting large national banking conglomerates to enter the real estate business.  Home owners pay real estate brokers lots of money to help them sell their real estate and we believe that permitting troubled banks to tap this cash flow would go a long way to help the mortgage banks. Sen. Clinton further proposed that if Congress doesn't repeal the laws the prevent national banking conglomerates from owning real estate brokerages, she will add a rider to the law funding the Department of Defense for $500 Billion Dollars to build a village that will be run by a consortium of the CEOs of all of the national banking conglomerates who will offer jobs to former real estate agents at $18,000 a year with full single payer health coverage administered by HUD.  Regional MLSs will be banned and home owners will enter their own homes for sale in a national listing database owned and operated by The Village leaders, the CEOs of the major banking conglomerates."

Jon Stewart has left the building. 

What happens after that is anyone's guess.

Heard at 9:01 a.m.  Jumbo mortgages are in trouble. 

FROM JEFF BELONGER: Explanation of Mortgage Loan, a history.

The fed comes on about 2:15 p.m. today.  That's a serious problem because "24" comes on at 2:00 p.m.

Senator Clinton's interview about speech, synopsis.