No more free rent?

1) Foreclosures generate very large losses for mortgage lenders ("motivated seller" discount, long time without mortgage payments, fees, etc). While servicing companies can benefit from this, mortgage lenders will not.
2) The Senate is scheduled to take on the mortgage cram-down legislation in a couple of weeks. This legislation would simplify dealing with securitized mortgages.
3) The government just announced a program to subsidize mortgage mods
4) The political climate is already quite toxic for banks, not a good time to step on Mr. and Mrs. Taxpayer

What gives? I can only explain it by home owners throwing in the towel and banks picking up the pieces

As for health care, that isnt exactly going to be a big opportunity in the short term, but might work if we decide to throw bazillions of taxpayer dollars at reform. And to see how that will go, have a look at how it is working for Taiwan. Great for patients, but the only way you'll get it done is to underestimate costs. Hmm, come to think of it, seems to be working that way in Massachusetts too.

here's the latest from the wsj on health care employment prospects :

http://online.wsj.com/article/SB123958719598112571.html

When else would banks try to unload record amounts of inventory? Same time next year?

You can't move that much product during the slow fall/winter seasons. The risk of waiting another full year, and further price declines, is not worth the potential for par value bailout. So you can swing 6 months and spin it as good PR for having a moratoria on foreclosures. Plus you get the benefit of increasing information over time, if housing had bottomed the banks were not exposed to underperform the crowd.

This has been expected for many months.

In lovely sonoma county 70% of the mortgages made in '05 through '07 were exotics.median prices reached 12x median income and DTI's were at 55% of "stated income". I suspect we might have a few foreclosures on the way...

i hear ya Tom...im waiting and watching for my move back to the bay area....still way overpriced in the nicer areas, but some places are down HUGE. I feel so sorry for a friend...bought at 400k plus in 2003...now down to 250, after a peak of 500+. This is oakland, by the way....but the pricey zips thereabout and piedmont havent really budged much. That wont change until more of the option arm resets come in. But there are tons of foreclosures in the nice places too. You see these million dollar places in foreclosure and wonder, what the heck were people thinking?

The plot thickens!

From NY Times

U.S. Planning to Reveal Data on Health of Top Banks

The administration has decided to reveal some sensitive details of the stress tests now being completed after concluding that keeping many of the findings secret could send investors fleeing from financial institutions rumored to be weakest.
...
The administration's hand may have been forced in part by Goldman Sachs, which successfully sold $5 billion in newly issued stock on Tuesday and declared that it would use the proceeds and other private capital to repay the $10 billion it accepted from the government in October.
...
Goldman's action has put pressure on other financial institutions to do the same - or risk being judged in far worse shape by investors. The administration feared that details on healthier banks would inevitably leak out, leaving weaker banks exposed to speculation and damaging market rumors, possibly making further bailouts more costly.
...
"The purpose of this program is to prevent panics, not cause them," said one senior official involved in the stress tests who declined to speak on the record because the extent of the disclosures are still being debated. "And it's becoming clearer that we and the banks are going to have to explain clearly where each bank falls in the spectrum."

Two senior officials said on Tuesday that they are now likely to encourage the banks to reveal a range of information, perhaps including the size of losses the banks could suffer under each of the "stress scenarios." Critics of the testing system, however, have questioned whether the scenarios are extreme enough.

Staged Homes Being Burglarized !!!

Entrepreneurship survives.

Happy Teabaggingday Eve everybody

Foreclosure of 2008 and 2009 will cost banks billion ~500 billion. Does this sound about right? I suspect banks don't loose 50% of the value of the house so the number should be smaller. Anyway, 500 billion doesn't sound so bad.

:: ::

I think 50% is optimistic in this environment - the loss isn't just the price mark down... it is also the overhead, fees & cost to process the sale of a depreciating asset into an already flooded market - a market with no credit and less money. Ugly.

"The purpose of this program is to prevent panics, not cause them," said one senior official involved in the stress tests who declined to speak on the record

Its simple... just release the results...

I've probably said this before. The left loves to blame greedy corporations. The right loves to blame big government.

Clue: Everybody's right. I don't know why people think the offense and the defense are playing for different teams.

dryfly and Mr Misean,

I disagree,

I think the average price of $250K is to high and the loss percent is to high as well....

The average house doent have a mortgage of two fifty and the stuff in the midwest wont lose 50%

Cali sure... FL sure.... AZ... yep...

40 states.... nope.....

........

ecoshift - good theory... like the name too... i feel the shift taking traction more and more every day... its good....

Happy Teabaggingday Eve everybody

anecdotal evidence...
I was at Wells today dealing with some bank acct issues. Banker and I got to chatting, and I asked 'can you see, in a broad sense, defaults coming?'
He got wide eyed and said that the 5/1 ARMs coming this year (2009) will most definitely outdo 2008. It was a somewhat local-specific conversation, and we happened to be in Newport Coast - one of the most expensive areas in the country. When he made examples of the changes in loans and the inability to refi, his example was a $2M loan... cause thats a normal loan around those parts.

This could be interesting...

Whoa, ain't this the truth. A family member died and I left their house empty for a year as I was busy. I did have it sealed and winterized, etc. because I knew I wouldn't have the time to deal with it before the will was executed. Anyway, after I finally opened it back up...

I shoulda left it closed.

Remove the body first next time

OT : marty wolf on a jelly roll, cruisin then wiffs completely at the end on the conclusion. How is it that just because our corruption is not overt and Russia's is, does that somehow let you escape the fact that it is corruption still? Weird.

http://www.ft.com/cms/s/0/09f8c996-2930-11de-bc5e-00144feabdc0.html?ncli...

dryfly... i believe you but i'm surprised... would bet on communities tied to cars getting crushed but a place like omaha? then again i dont know much about the midwest.... (much to the dismay of my co-workers)....

Tomorrow a series of protests are planed for "Tax Day" in the form of tea parties and the participants have started to refer to themselves as tea baggers. While I agree that there is much to be angry about, from what I can tell, most of the protest seems badly misdirected, and yet given who is behind the protests, the tea bagger label seems very appropriate (see http://www.urbandictionary.com/define.php?term=tea%20bag). The call for tea parties originally came from Rick Santelli's rant on CNBC about the government bailing out "losers" from the mortgages they took on. Since then the protest organizers, most notably Freedom Works, which is headed by former GOP house leader Dick Armey, have tried to focus them on being about the higher spending and deficits from the stimulus package and the Obama budget. They want to make this about higher taxes, although so far, no ones taxes have been raised, and come 2011, taxes are only going back up to the levels specified by the Bush tax plan, and then only for the highest earners in the country.

This crisis was handed to Obama by Bush. Eight years of deregulating and non enforcement of the remaining regulations are at the core of the problem. Yes, some imprudent people took out loans that were too big and to complex. The buyers did not have enough skin in the game and so when house prices started to fall they were quickly under water. A bigger problem was that the lenders didn't have any skin in the game. The loans were made by mortgage brokers who immediately sold them to small banks, which then sold them to larger banks and eventually to investment banks which tossed a big bunch of them into a cusinart to be sliced and diced into tranches and sold to institutional investors. Along the way, each party took out big fees, fees that went to pay big bonuses at Morgan Stanley (MS), Goldman Sachs (GS) and their departed brethren Bear Sterns and Lehman Brothers. The bankers, up and down the line, were the ones who were supposed to be the financial experts. They were the ones who were making the big bucks. If you want to be pissed at someone, they seem a more deserving target than the lenders.

The GSE's Fannie Mae (FNM) and Freddie Mac (FRE) played relatively small roles in the process. Yes they control about half of all mortgages in the country, but they were shedding market share like crazy during the biggest part of the bubble. Only when it started to pop, and there was no other place to go for mortgages did they really start to regain their market share. Non-GSE mortgages have FAR higher default and foreclosure rates than do GSE mortgages. Yet the tea baggers want to pin the blame on them and on the Democrats in Congress. The worst loans were made from 2003 through mid 2007. Until January of 2007, Barney Frank had about as much power in Congress as I have. On the Senate side, even in 2007 and 2008 it was so narrowly divided that almost nothing could be done, since these days a majority is not a majority unless it can get 60 votes.

We are starting to see "glimmers of hope" for the economy. Yes they are very faint, but they are there. The stimulus spending, along with the mortgage relief plan, and yes even the TARP, as incredibly mismanaged as it has been, are a big part of the reason for those glimmers. I think that Obama has been far too close to Wall St . I would have preferred that he went with the Swedish solution of taking over the insolvent banks, cleaning them up and then reselling them quickly rather than going down the Rube Goldberg inspired PPIP path. The request for more authority to deal with systemically risky institutions is long overdue. Apparently there was no middle path between an outright bankruptcy of AIG and providing it with almost unlimited amounts of taxpayer capital. The statutory authority did not exist because it was not a bank. A middle path might have allowed the government to pay some claims on AIG, for example a death claim on an AIG life insurance policy, and not on others, like a CDS's claim. A straight out bankruptcy of AIG would likely have been an unmitigated disaster, especially coming on the heels of the Lehman Brothers failure.

If you want to protest, protest the fact that there was no middle path available to the Administrations (yes plural, the AIG bailout started under Bush but became worse under Obama). Protest the failure to bring any indictments so far of the top people on Wall St. who let this all happen and profited so greatly from it. Protest the still extremely high salaries that are paid up and down Wall St . Protest the bonuses that went to AIG and Merrill executives. Protest the total dereliction of duty by the regulators (and I would include in that group Tim Geithner in his previous role as the head of the NY Fed). Protest the double standard where by contracts with executives are considered sacred, but union contracts are treated as so much toilet paper.

Don't protest the fact that Obama has to actually spend some money to clean up the awful mess he inherited. Don't protest that a few years from now some of these Wall St. types might have to pay the same "economy crushing" top tax rates that we had back in the Clinton years (you all remember the Great Depression of the 1990's right). After all only about 2% of taxpayers earn more than the $250,000 level where the higher rates will eventually bite, and in 2007, the average (including the receptionist) bonus at Goldman Sachs was $600,000. Far more hedge fund managers and investment bankers will be affected by those tax rates than small businessmen (well I suppose you could call a hedge fund a small business since they generally have few employees).

Just in case you have not guessed, I'm not planning on attending.

During thew conference call the GS addressed an interesting question. Analysts, etc were told that earnings are not due to "none recurring" events. Particularly it was stated that the AIG contra-party payments had no effect on cash flows this quarter. (p.s. Do we believe it? )
This morning on Bloomberg , Black rock executive broke a rank and joined a choir of people pointing out that there is no way banks could have made money without some counter party" payments.

show must go on !

"I think we should go easy on the banks. After all, they were just trying to help people get a home."

I agree. We should go easy on healthy banks that play by the book. As for the rest, killing them off has always been part of the free market game.

Xanax and everclear.

Another great local tale from the burbs of NoVa. I just found out today our next door neighbors house (short sale) is under contract for $128,000.
1. The house was purchased in 2006 for $379,000 - 66% haircut
2. Not totally trashed out like the one on the other side - owners that purchased in 2006 are still there. House needs work, but has all it's appliances & carpet so make me wonder again what will happen to the other house.

Poste on Bond Tangent of the Rockefeller Institute report on state tax revenues...check the plot of YOY changes in real state tax collections vs. GDP changes on page 8 and think about the differences between that recession and this one...enjoy!

Bond Girl's blog:
http://bondtangent.blogspot.com/

Straight to the Rockefeller report:
http://www.rockinst.org/pdf/government_finance/state_revenue_report/2009-04-14-(75)-state_revenue_report_sales_tax_decline.pdf

Enter California, uber welfare state:

California asks feds to back its IOUs

Facing what could be the largest cash flow problem in state history, California officials are asking the federal government to back billions of dollars in short-term loans the state must seek in July.

"We're going to need cash-flow borrowing the likes of which California has never seen, at a time when market and economic forces are stacked against us," said Tom Dresslar, spokesman for state Treasurer Bill Lockyer. "That's a recipe for calamity."

While the state routinely borrows money at the start of fiscal years on July 1 by issuing interest-bearing Revenue Anticipation Notes, or RANs, a combination of factors have conspired to form a mountainous hurdle this time around.

Those factors include the sheer size of the amount needed – at least $13 billion – the state's woeful credit rating and the generally sorry state of the nation's financial markets.