Ownit seeks bankruptcy protection

From the LATimes.com website :

The sub-prime lender, a casualty of the changing mortgage market, owes more than $165 million.

By E. Scott Reckard, Times Staff WriterDecember 30, 2006

Ownit Mortgage Solutions Inc. of Agoura Hills, which shut down abruptly early this month, has filed for bankruptcy protection, saying it owes more than $165 million to Merrill Lynch & Co. and other financial firms that bought Ownit loans now in default.

The petition, filed late Thursday in federal bankruptcy court in Van Nuys, was made in response to lawsuits filed by two creditors, said William Dallas, Ownit's chief executive and sole director.

He said if he had not filed the Chapter 11 petition, his 800 former employees would never receive the wages and commissions they are owed."Once you file Chapter 11 employee claims become the No. 1 priority," Dallas said in an e-mail Friday.

Assuming that the court approved his plans, he added, "once we file our 2006 tax return I will have enough money to pay them what they deserve."The filing is a sign of the stresses felt by so-called sub-prime lenders such as Ownit, which make higher-cost loans to borrowers with poor credit or limited incomes.

Ownit grew rapidly over the last few years, becoming a top 20 lender nationally in the sub-prime niche, but the closely held company turned unprofitable as interest rates and homes prices rose and competition for a shrinking customer base intensified.



Looks like some of these brokers posts are coming true.

Motivated or look for a couple of greater fools?

Old Craigslist:
Recall this post on August 8, 2006 , where the realtor claimed to be motivated and was looking to give away $75,000 of instant equity? Well, this home is still listed on CL and still has the same claim of $75,000 of instant equity and motivated seller. Is this realtor/home-debtor really motivated or just looking for a greater fool to take this albatross off of his neck?


New Craigslist:
This realtor/home-debtor also has another home on Craigslist-"Beautiful Lennar home offered at an incredible price, move in with $81,000 in equity!" He purchased this instant equity, er... home on June 2005 for $324,000 and is now trying to "give it away" for $349,000. Don't forget when you buy this home from this realtor to make sure and cover the "Property is in active tax default status"(Per the County of Kern's Website).



Looks like someone was drinking their own kool-aid? Is there no realtors code of ethics? Can they make these claims of "instant equity" when they, as the professionals, have been unable to capture this equity their selves?

Mortgage Brokers Christmas Poem?

From Brokers Outpost comes tonight's Christmas poem:


T'was the night before Christmas and all through the house, the family was moving, the M.B. was a louse.

He put them in an Option ARM with care, with visions of YSP dancing through his greasy hair.

The rate went up and the family knew, the old M.B. gave them the screw.

The foreclosure note was hung with great care and they soon knew the sheriff would be there.

The called the office and sent some mail only to find out the M.B. was in jail.

They quickly found out the office was closed, something about the way clients were hosed.

They whined and they cried and said they got screwed all because the disclosures where skewed.

They heard a fast car drive out of site with the A.E. screaming "piss on you all I've had a hell of a night".


Sounds like a stand up profession to me.

Another One Goes Out of Business

To All HMIC Business Partners,

It is with deep regret that we announce Harbourton Mortgage Investment Corporation will cease operations effective the close of business today, December 20th, 2006.
We are extremely proud to have had the opportunity to serve our Brokers, Investors and Business Partners and wish everyone much success in the future. Provided below are areas of contact:

HMIC



Here is their last Press Release on Dec 8, 2006:

Harbourton Capital Group, Inc. ("Harbourton" or the "Company") (OTC:HBTC) today reported a loss of $3.6 million, or $0.71 per common share, for the three months ended September 30, 2006, compared with net income after tax of $42,977, or $0.01 per common share, for the comparable period in 2005. The loss for the nine months ended September 30, 2006 was $7.3 million, or $1.45 per common share, compared with net income of $621,899, or $0.11 per common share, for the comparable 2005 period. There were 5,061,375 shares of common stock outstanding during the three and nine months ended September 30, 2006 and 2005. Common shareholders' equity at September 30, 2006 was $17.7 million, with a corresponding book value of $3.49 per common share, as compared with $25.0 million at December 31, 2005, or $4.93 per common share.

The Company completed the acquisition of Molton Allen Williams Mortgage Company, LLC ("MAW"), headquartered in Fairfax, Virginia on August 31, 2006. In connection with the acquisition, the Company issued $2.1 million in preferred stock and a note payable in the amount of $300,000. The assets and liabilities acquired in the MAW transaction were contributed to the Company's wholly owned subsidiary Harbourton Mortgage Investment Corporation ("HMIC"), increasing the capital position of HMIC. The transaction was recorded using purchase accounting and accordingly the results for the quarter ended September 30, 2006 include the results of operations for HMIC only for July and August and the consolidated results of both HMIC and MAW operations for the month of September.

Employee Rewarded

Nice story in the LA Times about a former WaMu employee who noticed a significant amount of mortgage fraud and spoke up. She faced the wrath of the REIC, however, in the end good prevailed over evil:

A former Washington Mutual Inc. vice president, who claimed that she was retaliated against after raising questions about loan-funding practices, has been awarded $1.24 million in damages by the Labor Department.

The decision, issued Tuesday, is believed to be the first in a Sarbanes-Oxley whistle-blower case in which an employee won so-called front-pay damages from an employer instead of reinstatement, said attorney Marc Susswein, who represented the former vice president, Theresa Hagman of Moorpark.

Hagman, who was unavailable to comment for this story, was hired by Washington Mutual as a vice president and manager of a construction lending unit in Chatsworth in 2001. She consistently received stellar performance reviews and was offered a promotion, according to the judge's written decision.

Beginning in December 2003, Hagman noticed that about 30 loans hadn't been completely funded and had gone into immediate default, something that had occurred only twice the year before. When she raised her concerns with a supervisor, he became angry and, Hagman said, was physically and verbally threatening.

She reported the confrontation to other managers and to the employee relations department, which Hagman said did nothing. She also reported her concerns about the loans and an internal investigation was opened, which eventually vindicated Hagman and found that procedures weren't followed.

Central Valley Prices Down 3.9% YOY

Per the Central Vally Business Times :


Home sales plummet as prices continue to rise
LOS ANGELES December 22, 2006 6:12am
• Sales off 22 percent


The median price of an existing, single-family detached home in California during November 2006 was $555,290, a 1.4 percent increase over the revised $547,870 median for November 2005, according to CAR’s figures, which are based on its survey of member Realtor associations. CAR’s figures do not include all types of sales and are generally higher than those median prices that do.

But prices are heading down in the Central Valley.

The median price for a home sold in the Central Valley in November was $340,370, the Realtors say. That is down 1.2 percent from October and down 3.9 percent from November 2005.

“Although the statewide median price is on track to post just under a 7 percent increase for the year, there is a mixed picture across the state, with more regions reporting year-to-year declines than increases at this point,” says Leslie Appleton-Young, chief economist got the Realtors association. “We’ve seen three or more months of year-to-year price declines in areas where there was a lot of homebuilding activity and in those areas that are popular for second-home purchases.”

Central Valley leads nation in foreclosure risks

From the Central Valley Business Times:

Report: Central Valley leads nation in foreclosure risks
DURHAM, N.C. December 20, 2006 6:08am

• Merced ranked most risky
• Nationally, 2.2 Million borrowers face foreclosure on subprime loans

Holders of so-called “subprime” mortgages are in danger of losing their homes, especially in the Central Valley, according to a report from the Center for Responsible Lending.

As much as $164 billion in mortgages is at risk due to foreclosures in the subprime mortgage market, it says.

With 25 percent of the mortgages issued this year being subprime, Merced County ranks as the nation’s most risky area for foreclosures, according to the report.

Other Central Valley areas are not much better, it says.

Bakersfield ranks second in the nation; Fresno is fifth; Stockton is seventh and Visalia-Porterville is 13th.

“We project that one out of five (19 percent) subprime mortgages originated during the past two years will end in foreclosure. This rate is nearly double the projected rate of subprime loans made in 2002, and it exceeds the worst foreclosure experience in the modern mortgage market, which occurred during the ‘Oil Patch’ disaster of the 1980s,” the report says.

The organization says its study is the first comprehensive, nationwide review of millions of subprime mortgages originated from 1998 through the third quarter of 2006.

Factors driving subprime foreclosures include adjustable rate mortgages with steep built-in rate and payment increases; prepayment penalties; limited income documentation; and no escrow for taxes and insurance, the report says.

(Hat Tip to Modesto & Merced Bubble )


http://www.centralvalleybusinesstimes.com/stories/001/?ID=3878

HOV Cash Flow Used By Operations

HOV results out today. I will post on them, as they have a significant presence in Bubble Town, USA. Looking at their most recent SCF filed with the SEC (on MSN.com) their core operations are clearly not generating positive cash flow results. You would think that during this run up that these numbers would be positive, think again. Here are the last 5 quarters NEGATIVE cash flow from operations:


Cash Flow Used in Operating Activities (in millions):

-838.36
-642.71
-307.06
-23.94
-144.87

How much longer can a company continue to operate by losing money on its core operations? Then came the news today that they will also lose money for the quarter.


Hovnanian Enterprises swings to quarterly loss

By Ana Campoy
Dec 18, 2006
SAN FRANCISCO (MarketWatch) -- Hovnanian Enterprises Inc. (HOV :
Hovnanian Enterprises, Inc late Monday said it swung to a fourth-quarter net loss available to shareholders of $117.9 million, or $1.88 a share, as revenue fell and margins narrowed. In the same period last year, the Red Bank, N.J.-based home builder posted net earnings available to shareholders of $165.4 million, or $2.53 a share. Revenue fell 1.5% to $1.75 billion from $1.77 billion. The company expects 2007 per-share earnings of $1.50 to $2, on 16,000 to 18,000 home deliveries. For the first quarter, Hovnanian sees per-share earnings of 5 cents to 10 cents. "We believe that the overall U.S. housing market may hit the bottom in the first half of 2007," said Ara Hovnanian, the company's president and chief executive, in a statement. "However, the housing market is likely to bounce along the bottom for several quarters before pricing and sales pace improves."

"The local housing market is RED HOT"

According to Mark Thorngren, is his post updated 12-15-06, "the local housing market is RED HOT". HUH??:

The local housing market is RED HOT. The homes here appreciated approximately 35% in the last year! You can find a brand new 3 bedroom home for under 350K. Luxury homes normally begin at about 550K. Similar homes in Ventura County -further South -will typically sell for 3 times this price! Bakersfield has a population approaching 300,000 people and staddles the Kern River.


http://realtytimes.com/rtmcrc
ond/California~Bakersfield~markthorngren

Multi-Million Dollar Flip or Flop: Update

Today's post is on a Multi-Million Dollar Flip or Flop. Recall this post, on August 23, 2006, http://bakersfieldbubble.blogspot.com/2006/08/flip-or-flop.html :

Will this Flipper make it? Or is he too late in the game to turn a profit? Purchased 3/31/06 for $1,750,000 add in the carrying costs to date (estimated) and he is at $1,800,000. Orginally on the market for $2,600,000 now for sale at $2,200,000. Will some greater fool come along??



Property taxes were due on 12/11/06 and per the County of Kern's wesbite they were not paid. The taxes are still due along with a 10% penalty. Also, the home is no longer on the MLS, however, it is still listed for sale on the realtors website and per my contacts the home remains empty.

Local home sale prices will continue to fall

Home prices continue to drop, down 3.5% YOY (year over year). Also, the inventory is at approximately 3,800 homes. We started last year with about 1,750 homes. I predict that a tsunami of listing's hit the market beginning the first few months of the year. This will only had to the supply/demand problem we have. I think Gary's comments below, of a 5 % decline, are very conservative. However, at least he is not cheerleading like the other members of the REIC.


From the Bakersfield Californian:

Local home sale prices will continue to fall

The Bakersfield Californian Thursday, Dec 14 2006 7:30 PM
Last Updated: Thursday, Dec 14 2006 7:35 PM

Existing home sale prices in the Bakersfield area will decline by about 5 percent in 2007, local appraiser Gary Crabtree projects. The median sale price of existing homes in metropolitan Bakersfield was $279,900 in November, down 3.5 percent from the same period a year before, Crabtree said.

"It's a correction and the correction is taking place all over the state and the country," Crabtree said. Crabtree said the number of existing home sales in November -- 340 -- was down almost 33 percent from the number of sales recorded in November 2005, the result of high supply and declining demand. "When that happens, the price is going to adjust," Crabtree said.


http://www.bakersfield.com/137/story/89469.html



Let's look back at what realtors said after last month's report. Why don't the reporters follow up with these cheerleaders and ask them "Were you lying to me last time we spoke?" http://www.bakersfield.com/137/story/79681.html:

Robert Kleinhenz, the association's deputy chief economist, said he expects Bakersfield's median house price to remain flat or possibly increase slightly next year.

The area has strong job and population growth, Kleinhenz said, and "that's going to support a market that's a little bit more buoyant."

"The drop-off in sales in Bakersfield is not quite as severe," Kleinhenz said. "It's actually faring much better than many other central areas."

Local real estate agencies are starting to get more phone calls and hold more open houses.
Activity is increasing, but it hasn't had a dramatic impact on sales yet, local agent Nancy Harper said.

November foreclosure rate highest of the year

From the Central ValleyBusiness Times.com:


In November nationwide, 120,334 properties entered some stage of foreclosure, an increase of 4 percent from the previous month and an increase of 68 percent from November 2005, according to RealtyTrac Inc., of Irvine, which operates an Internet-based marketplace for foreclosure properties.

Its report shows a national foreclosure rate of one new foreclosure filing for every 961 U.S. households, the highest monthly foreclosure rate reported so far this year.

"Defaults, auctions and bank repossessions all trended higher in November, bringing the year-to-date foreclosure total to almost 1.2 million -- up 43 percent from the same 11-month period of 2005," says James Saccacio, RealtyTrac president. "With home price appreciation slowing, and even declining in some areas of the country, homebuyers who stretched themselves financially to purchase a property don't have much equity to work with if they experience even a small bump in their mortgage rate or disruption in their income.”

Nevada wins at foreclosure capital of the country

After eight consecutive months with Colorado posting the nation's highest foreclosure rate, Nevada's foreclosure rate jumped to the top spot thanks to a 12 percent increase in foreclosure activity from the previous month, RealtyTrac says.

Nevada reported 2,506 properties entering some stage of foreclosure during the month, nearly triple the number reported in November 2005 and a foreclosure rate of one new foreclosure filing for every 346 households -- 2.8 times the national average.

Colorado foreclosure activity decreased nearly 10 percent from the previous month, helping the state's foreclosure rate -- one new foreclosure filing for every 362 households -- drop to second highest among the states, according to RealtyTrac’s figures. The state reported 5,051 properties entering some stage of foreclosure, still up 88 percent from November 2005.


California reports highest number of foreclosures for third straight month

More than 19,000 California properties entered some stage of foreclosure during November, the most of any state for the third straight month and an increase of more than 19 percent from the previous month, RealtyTrac says.

The state's foreclosure rate of one new foreclosure filing for every 635 households rose to 1.5 times the national average and jumped to seventh highest among the states after being 12th highest the previous month. California foreclosure activity has more than tripled from a year ago.

http://www.centralvalleybusinesstimes.com/stories/001/?ID=3807

Myth "The longer you wait the lower the Price."

Maria Chavez over at Realtytimes.com has an interesting piece out. She claims that the longer you wait the more you will pay. Tell that to those who bought in 2005 and are now underwater due to declining values (see my numerous previous posts on price drops):



Market Values have decreased, due increased inventory in available properties. This pressuring available properties to be reduced for quicker sale. Buyers take advantage; this benefits you as you have more choices, although this creates the Myth "The longer you wait the lower the Price." The problem with that is, we may see Interest rates increase, and that will make it more difficult for Buyers, as they may loose out of the good interest rates we still have. Sooner than later the present inventory of available properties will come back to normal, then we may see prices come back up.

http://realtytimes.com/rtmcr
cond/California~Bakersfield~mariachavez

Going Down - High end update

Just when you thought it was safe to go back into the water...

Looks like the locals saved another $29k. This home was originally priced at $1,150,000 and is now listed for $899,900.00. At my last update on December 4, http://bakersfieldbubble.blogspot.com/2006/12/high-end-update.html the home was listed at $929,000.

How much lower will this home go? How could the realtor have missed the market by nearly 30%?

Back from the basement

As this massive credit bubble unwinds I will periodically look back at some of the foolish claims made by the REIC. Today, I want to focus on the claims made by "veteran analyst" Michael Youngblood of Freidmans Billing and Ramsey. Back on May 15, 2006 in Business Week he made some rather foolish claims. I assume he was trying to flip a house and needed to find a greater fool or maybe he is part of the marketing arm of the REIC trying to suck a few more GF's (greater fools) into the residential real estate market.

This guys analysis says Bakerfield will be up 43% this year. Are you kidding me? What does his analysis involve - sticking his head in his a$$ and pulling out some combination of fingers and then making up a number? By the way Bakersfield is down 2% YTD. Also, Fort myers Florida is down significantly YTD.

I emailed him and asked him what the hell he was thinking when he made these outlandish claims and if wanted to retract his pie in the sky analysis; surprisingly, I received no reply. Maybe when he gets to the pearly gates he will have to answer for these claims he made. I wonder how many young families took the bait and choose to buy into the American dream and instead it became their American nightmare?




Why The Housing Bubble Won't Burst

Veteran analyst Michael Youngblood explains his unusually optimistic take on the real estate market.

He bases this assessment on a new economic model he created that forecasts housing prices in 379 metropolitan statistical areas. Associate Editor Toddi Gutner spoke with Youngblood about his upbeat view and his surprising prediction that the greatest price appreciation will be coming in so-called bubble markets.


What makes you more optimistic than other housing experts?
I look at two economic indicators that I think drive the housing market: the growth in employment and the growth in personal income. Getting a job or a salary increase is what motivates people to buy their own home. This is different from the data the National Association of Realtors and other organizations rely on. They are more concerned with technical indicators such as the inventory-to-sales ratio and the number of months a house is on the market. These aren't leading indicators. Instead, they move with current changes in the market, rather than predict those changes.


Do you think the housing bubble argument is overblown?
Absolutely. It's overblown because there is no national housing market, so there can't be a national house-price bubble. However, there are bubbles in 75 of the 379 markets I studied. A bubble exists when the ratio of the median existing house price to per capita personal income exceeds 6.8 times. This definition is based on historical data of when other markets, like Houston and Boston, had bubbles


What markets are likely to show the biggest price gains and declines this year?
We expect the greatest gains in Bakersfield, Calif. (43%), Fort Myers, Fla. (42%), Stockton, Calif. (39%), and Punta Gorda, Fla. (35%); the biggest declines in Harrisburg, Pa. (8%), Odessa, Tex., Roanoke, Va., and Utica, N.Y. (all 6%).

http://www.businessweek.com/magaz
ine/content/06_20/b3984102.htm?chan=search

Sub Prime Blowup?

Looking at the latest postings on the Broker Outpost, one would think the Sub prime market is ready to blow up:


(1) http://forum.brokeroutpost.com/loans/forum/2/77339.htm

Just got this in an e-mail. Anyone else heard of these?
Own It - CLOSED
Sebring - CLOSED
Maribella - CLOSED
MLN - Lost it’s only investor today, scrambling to replace them.
D1 - needs a 580+ for any stated Loans
People’s Choice - 660+ needed for FTHB to


On MLN:
Last night, their national director of Wholesale (PaulImpaggilazzo) resigned his position with MLN last night.He left his managers with a message that is being relayedto his AE’s today.
1. For the foreseeable future, we are only going to payyou 25% of all the commissions you earn and defer the restback into the company operating fund as we try to raisecapital to stay afloat - Unfortunately, at this moment, wecannot afford to pay you the full commission you earn.
2. Our exclusive sale agreement with RFC has beenterminated - we have nobody to sell our loans too.
3. We are heading to Wall Street immediately and beganyone we can to offer us warehouse lines of credit so wecan continue funding loans.



(2) Encore is out of business? http://forum.brokeroutpost.com/loans/forum/2/77503.htm


“And another one bites the dust (allegedly). At this rate there’s not going to be too many subprime lenders left”

Dropping Like Flies

Update: Employee of the month at OwnIt Mortgage (from the affilate website Dallas Capital):http://www.dallascap.com/bios/biosfrm.html

Angel anticipates an exciting future with Dallas Capital and Ownit Mortgage Solutions.




Looks like the expected lending shakeout continues with two more players dropping like flies, adding to the REIC dead pool:


Ownit a victim of sub-prime shakeout

The mortgage lender closes suddenly amid a cooling housing market and funding troubles.
Ownit Mortgage Solutions, an Agoura Hills-based wholesale lender, has ceased operations and laid off 800 employees nationwide, part of the shakeout in the sub-prime lending business. One employee, among 300 to lose their jobs in California, said he learned of the company's demise Tuesday while manning the Ownit booth at a mortgage conference in Las Vegas.

Panet said he didn't know how much pay would be coming to employees."I've been told not to expect anything as far as severance goes," he said. "It's not sure we will be getting a last paycheck on the 15th."

http://www.latimes.com/busin
ess/la-fi-ownit7dec07,1,6041977.story?coll=la-headlines-busi
ness&ctrack=1&cset=true



Mortgage bank abruptly closes

Sebring Capital Partners, a Texas-based subprime lender with a Denver-area office, falls prey to the rising rate of defaults in another sign of the industry's trouble.

"We were exploring several different opportunities, and unfortunately none of them came to fruition in a manner that allowed us to continue as a going concern," he said.

http://www.denverpost.com/headlines/ci_4785136

High End Update

High End Update - Still DEAD!






Remember this report back on 10-14-06 ttp://bakersfieldbubble.blogspot.com/2006/10/high-end-market-is-dead.html


Well it looks like the locals just saved $20,000 by having a little patience! Keep up the good work! This home is now listed at $929,000: http://www.marycrealtor.com/
Bakersfield_listings/Current_Active_listings.shtml

Local Contractors Stiffed

Millionare stiff's local contractors. Merry Christmas and thanks for all the work done on our McMansion!

From 23 News:


http://www.turnto23.com/news/10436327/detail.html

BAKERSFIELD -- Dozens of protestors picketed in front of a southwest Bakersfield home on display at the Chez Noel Christmas Home Tour Friday morning, claiming nearly $700,000 in unpaid construction costs.

The tour opened its doors Friday, giving local residents a chance to see three spectacular homes all dressed up for the holidays. One of the three homes, however, has become a battleground between the home owners and home builders.

A 23ABC investigation found more than a dozen subcontractors who said they've been trying to get paid for several months on a stocking full of extras and upgrades they provided during construction; an unpaid bill they say is in the hundreds of thousands of dollars.

The 7,500 square foot, Georgian-style, two-story home sits on the edge of a gated neighborhood in Seven Oaks. The interior is decorated like a circa 1800's English manor, with lots of extras. But it's those extras that reportedly caused the price of the custom home to skyrocket.

Ron Pruitt said the owners, Greg and Gina Hartman, wanted 40 different oil-based colors, imported from London, to use on the interior. He said he explained the process would triple the original estimate.

Most of the contractors we spoke to said the requests the owner made were satisfied but never paid for.

Once it was complete, contractors said the owners paid for the original bid, but didn't pay for any extras to the tune of $700,000.

37% Gone

To all those who claim there is no bubble in the Valley. Please read this. Homeowner loses $235,000 by buying into the American Dream. I know this is happening here, however, the Californian refuses to print stories like this:

From the Modesto Bee.com


Tax assessors may ease pain for buyers with bad timing

Albert Quintero's timing couldn't have been worse.

He made a deal to buy a new Turlock luxury home in November 2005, at the real estate market's peak.

By the time construction ended in July, Quintero's Milestone Way home wasn't worth the $874,890 he was contractually obligated to pay.

Now the same model — a new home on nearby Tapestry Way — is priced at $639,990.

"It's really tough to swallow that we paid 37 percent more than what our home is worth now," Quintero said. "We got caught."

He wasn't the only homeowner burned by buying at the top of the market


http://www.modbee.com/local/story/13069752p-13723099c.html


Hat tip to the Sacrmento Blog and Modesto Blogs!