THE REAL ESTATE INDUSTRY WHERE TRUTH IS, INDEED, STRANGER THAN FICTION. MORTGAGE LENDING REPORTING - HEADLINE IN THE FINANCIAL NEWS THIS A.M. -
"Countrywide Financial Corp., the nation's largest mortgage lender, said Friday, it swung to a loss of more than $1 billion in the third quarter due to rising loan-loss provisions, writedowns and dwindling origination volume."
HOWEVER, the company insisted it will be profitable in this quarter and in 2008. A bit of restructuring should do the trick, Countrywide claims.Further, Countrywide claims that the third quarter loss of $1.2 Billionwas due to the report of an "earnings trough". For the curious, an earnings trough is when a public company saves all the bad news for one reporting period. The theory is to get all of the bad news out of the way so thecompany can focus on good things to come.
Third Quarter 2007 Loss - $1,200,000,000.
Third Quarter 2006 Earnings - $647,000,000.
WHAT COULD HAVE CAUSED THIS POOR EARNINGS REPORT? Countrywide increased it's loan-loss reserves due to expected rise in delinquencies and defaults, primarily among subprime mortgages to buyers with poor credit. Reserved was $934,000,000, up $38,000,000from the same time last year. Writedowns of $690,000,000due to the company's inability to sell subprime and other nontraditional loans due to rising delinquencies and defaults.
Countrywide is promoting their stock on projections for the 4th quarter. Angelo Mozilo, Chairman of Countrywide, is under investigation by the SEC due to his large volume of shares sold recently while the stock was plummeting.
Of course, the upward movement in the stock today could be due to short-sellers redeeming their stock. Mmmmmm.
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REAL ESTATE MARKET REPORTING. " It's deja vu all over again."
WASHINGTON, October 24, 2007 -
Temporary problems in the mortgage market are easing and are expected to free some pent-up demand, but
disrupted existing-home sales and distorted prices on sales closed in September, according to the National
Association of Realtors�. Even so, prices rose in the Northeast and Midwest.
Temporary problems?? Can anyone recall when the "temporary problems" in the mortgage industry began?
The most interesting line? "Even so, prices rose in the Northeast and Midwest."
Prices on existing homes did, indeed, increase in my market. A rise in prices is seen by the "experts" as a good thing. The guys at NAR need to try to sell and average detached $700,000 homes in a market where the average income qualifies the average home buyer for $400,000. That dang income thing!
THE GOOD NEWS AND THE BAD NEWS ABOUT ONE AREA IN MY MARKET PLACE, FAIRFAX COUNTY, VA.
The sold prices have held steady from 2005 through 2007: $547,002 to $514,124 to $526,732Total units sold from 2005, 2006, to 2007 are:
- 2005 - 1,828 units
- 2006 - 1,123 units
- 2007 - 729 units
SMOKE AND MIRRORS! SMOKE AND MIRRORS!
UPDATE: 3:30 p.m. on the way to and from visiting a builder today, I listened to a replay of the hearings held in Boston by Rep. Barney Frank, with testimony by regulators, consumer groups and later today, lending industry reps. One of the Congressman questioning the "guests" didn't know what P.I.T.I. meant. The question was about mortgage escrows.
We're doomed.
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