Monday, February 19, 2007

Subprime Blowup Wave #2?

Many subprime lenders have closed in the last few months with potentially many more to come. Back on Dec 7, 2006 I listed several potential companies that were on the brink of collapse. Several of them eventually bite the dust.


Looking at the brokers blogs it looks like we may have a second wave of the tsunami coming to the shore?:


Is SouthStar Next:

One of my lenders told me that South Star didn't make payroll. Can someone confirm with me if this is true or not?
by JJMotgage February 19, 2007

They are or were run so poorly, shitty management...
by GBI February 19, 2007


What's going on with Argent? :

One of the Ae's down here says they are closing,anyone that can confirm this?
by fundingAE February 19, 2007

Well, it may be true if it came from the AE. However, I am sure that type of collapse would spread super fast.
by firsthomemortgage February 19, 2007


WMC Going Under:

I talked to My (not going to say if it's my brother or sister, so I’ll this person Chris), last night. For the sake of confidentiality, Chris told me that WMC (General Electrics’ Sub prime Lender), is going to close their doors next week. At first they wanted to lay off as many people as they could in a way that would eliminate their ability to collect un employment or require severance pay. They would basically put everyone on a performance review period and force them to meet a specific target, something around 20-million in sells. Since not a single person in the company is meeting these targets, they couldn’t do it this way. So Chris tells me that they are expected to close their doors next week. WMC is the 3rd largest subprime lender in the country.
Chris also tells me that chirs has never seen anything so scary. People are so freaked out because they have bought so many investment properties that they will not be able to afford with a standard pay.

All Chris can tell me is that this is only the start of the down turn for the market and if I think it’s going to be pretty anytime soon, I am fooled. The general public is going to be scrambling in about 7-months..


I have hear rumors on WMC, Southstar, D1 and more. Is there a subprime lender that will survive?

With all the rumors that are floating around. I would like your opinion on who you think will survive in the subprime market?
by firsthomemortgage February 19, 2007

74 comments:

Anonymous said...

Don't know if this sub-prime lender is going down but all sub-prime lenders should go down .

The real estate market will eventually go back to hard money lenders giving the loans to the unqualified at very low loan to value loans like it use to be .

I can't even believe that lenders think even a 10% down payment is enough on a sub-prime loan.

How the public could even stand for the fact that guys like Casey got loans ,causing people to be priced out of the market, or people getting their tax bill raised beyond reason .

The media isn't putting the dots together yet but eventually there will be a public outcry about what happened with this RE market and the truth will come out .

Housing Wizard

Perfect Storm said...

If WMC goes down that will be huge. I hope the WMC guys and New Century Guys take turns servicing bubba in the big house.

Housing Wizard you are right on the money. Subprime needs to go away, as for hard money lenders they loan on equity and it will be nearly impossible for them to make any money from the down fall of subprime until equity is built up with people who have crappy credit.

Cheers to the fall of subprime.

darth toll said...

Probably Wells Fargo will survive because they get rid of so much of the garbage paper and they are historically very conservative. I think CFC will get a huge haircut but will probably also survive due to good management. As for the rest of the bunch, I'm not so sure any of them will make it. Wamu is toast. Citi will survive but will be out of subprime entirely so the net effect is the same.

Housing Wizard, I hope you're right but I'm so pessimistic as to the MSM putting together any dots about anything.

Anonymous said...

I agree perfect storm that the hard money lenders will need equity to make loans.

As you said ,there was always a place in lending for making loans to crappy borrowers ,but they were always at a low loan to value to offset the risk .

There is no way that sub-prime lenders can survive now without real estate going up . As we see the sub-prime lenders fall so shall we see the people they made loans to fall.

Housing Wizard

Anonymous said...

Please help me here........what exactly is a "subprime" lender in simply terms and do they affect me? How do you know if you have a subprime loan? All I know about my loan is it is a 30 yr. fixed conforming and my credit score is excellent also

brass balls said...

I think some subprime lenders will survieve.This is a classic example of too many people getting into the business when times were good.Now you have to weed out the competition as times get tough.I think the new lending tools are here to stay.The industry has changed with the increase in technology.

Anonymous said...

All 100% subprime lenders will go.

Most lenders that are only partially subprime will just shutdown some branches, lay-off some and do business as usual.

Anonymous said...

anonymous ,,,In answer to your question you have a conforming 30 year fixed so your not a sub-prime borrower .

Sub-prime borrowers have low credit scores usually or they have lower income than you usually need to qualify for a conforming fixed loan .Sub-prime borrowers usually don't have saved money for down payments .

The industry had no business making low down loans to the sub-prime borrowers . These crappy borrowers increased the demand for housing ,which resulted in prices going up .A good % of the speculation buyers also went on these loans because they didn't have to put very much down to gamble on real estate short term .

The sub-prime lenders were approving all the inflated appraisals which caused the appraisal comps and taxes to go up in many areas . Regular lender would than also use those faulty comps to determine this false market value .

Why was it a false market value because of sub-prime lending ?

Because if a sub-prime borrower can't really afford the adjusted up payment they will default eventually and if the speculator can't cash flow on the property they will eventually default on the property . Than you get all this prior demand that drove up the prices going into foreclosure .Than prices are driven down because of to many foreclosure sales .

So even if you were a prime borrower you were competing with sub-prime borrowers for property (who should not of been in the game ). Market value is what a willing and "able" borrower will pay . You can't say that a gambling speculator or a unqualified buyer is really a "able buyer" . If real estate doesn't go up these borrowers run into trouble and lose the house or need to sell cheap in order to bail or the bank takes the property back and needs to sell cheap to unload .

The sub-prime lenders drove the market up by this false unstable demand and those unstable loans will drive the market down because these borrowers have no ability to sustain a long term loan .

In past real estate cycles sub-prime borrowers and investors made up a small % of the market . Now these sort of borrowers make up such a high % of the market that it has created a very unstable situation .

Sorry for the long post but I posted it for people who might not understand how the sub-prime lenders changed the RE market stability in recent years . These lenders and their borrowers were all counting on the fact that real estate would continue to go up .
Housing Wizard

darth toll said...

"The sub-prime lenders drove the market up by this false unstable demand and those unstable loans will drive the market down because these borrowers have no ability to sustain a long term loan ."

Great point, and the subprime borrowers represent a tremendous risk for the lenders. Who knew that subprime borrowers don't pay back loans reliably!?!?! haha. Anyway, it will sure be nice when I finally go to buy a house again when I'm not competing with a bunch of credit deadbeats that have no business buying a house in the first place as they have no money and no credit. Why lenders (investors) ever thought this was a good idea is beyond me. I'm sure the profit was tremendous as long as prices skyrocketed, but they must have known that the whole thing was a self fulfilling prophesy: lend tons of money to anybody and everybody causing tons of false demand, causing prices to skyrocket even higher. Now on the flip side, these credit deadbeats default in droves, causing massive losses and deadbeats get foreclosed on causing a complete elimination of false demand and a collapse in prices.

Duh, what a terible idea, but I guess it sounded good at the time.

Mozo Maz said...

Compare a chart of the percentege of mortgages that were subprime, with a chart of median housing prices in bubble cities - and you will see a strong similarity.

I'm a believer in the axiom that "subprime drove the bubble".

Take the subprime away and you get 2003 pricing. Below that is all momentum, as the market searches for a bottom where it can quit fearing the future.

Gary Anderson said...

This is getting quite exciting. Subprime tanking has people fearful of derivative defaults, financial system collapse, cats and dogs.

Not only that, without the 80/20's, where are they going to get the bottom rung of the ladder folks who feed and keep the ponzi scheme going?

I just hope we don't have the mother of all depressions. Maybe this is why Bush went into Iraq to steal oil. Maybe, he is trying to save the dollar by an illegal war. Nah.

Gary Anderson said...

I mean, nah, it won't work. If the housing market tanks completely, the dollar is toast anyway.

Mozo Maz said...

Bank of Japan inched up to 0.5%. The pressure to return to reality is building.

Anonymous said...

Mozo Maz said...
Bank of Japan inched up to 0.5%. The pressure to return to reality is building."

F-ing awesome, one more step to finishing off the easy money!!!

Now the U.S. needs to raise .25% to help fend off inflation, that's been left unchecked.

penile implant said...

I love subprime mortgages!!!!!I get to loan money to brilliant folk and make big money.I made 1.5 million last year off of these morons.If they are stupid enough to take the money then we give it to them and make fat commissions.Isn't this the american way, take advantage of the lower classes so you can get rich.I love this business.I've got to go get another venti frappucino.

Anonymous said...

Is there anywhere to find charts, data online about the Bakersfield market. The only thing I have found is Dataquick which goes city by city but its only a mom/yoy snap shot. Which is hard to see trends (I should have been recording the numbers each month...but I havnt).

Also I am looking for any charts or data about inventory levels (new and existing).

Anyone have any ideas?

Aaron Krowne said...

I predict that "sub-prime loans" will become at least as notorious as "junk bonds" in the public mind (and with less likelihood of the kind of financial resurgance the latter has seen recently).

Aaron Krowne said...

Oh and I'm hearing *lots* of things about People's Choice... WMC as well.

ROROYOYO said...

Why all the "I hope sub-prime goes down" rhetoric?

Things have definitely gotten out of hand, but let's not throw the baby out with the bathwater.

Subprime should remain, and it should - and will - be thoroughly regulated and scaled back, both by the market and probably through government regulation during the fallout.

Don't get your panties all in a bunch, subprime is, and will be, a viable option for scores of worthy borrowers and investors for years to come - just not as the overblown monstrosity that we have before us at the moment.

Yes the piper has to be paid, but let's not actively wish for the end to an industry that provides a great alternative to the likes of hard-money lenders, who are, after all just legal loan sharks.

Anonymous said...

Now I realize the "buzz" is to knock the subprime and it is easy to jump on the wagon, but these subprime lenders have given 90% of the people that could not possible save the down payment the opportunity to purchase homes. The poverty level is gapping like no tomorrow. You guys are making it sound like every loan is defaulting, which is simply not true. These companies are getting screwed by three things:
1. They are living paycheck to paycheck and now they cannot afford the buybacks without losing the minimum liquidity to keep their wholesale lines open.
2. Big Banks are calling in the wholesale lines, becuase the subprime lenders liquidity limits are not being kept and have the right to call in the "note".
3. Awful accounting practices and not setting aside the right amount of money, becasue the first payment default clause in the wholesale lines have not been called in the past few years.

Subprime is not the only party to blame here...scapegoat is more like it.

check your facts...the subprime company is not the one lending on only 10%, they wholesale it to Wall Street...wall street was agreeing to buy these loans...there would never have been a market, if the big banks did not want there to be one - its all smoke and mirrors.

Anonymous said...

OH MY GOD! My friend's sister's brother's mom's dad's uncle works over at Argent and apparently they are literally BUTCHERING their employees. The managers were given machetes and told to cut costs.

Gives a whole new meaning to "severance", doesn't it?

darth toll said...

"these subprime lenders have given 90% of the people that could not possible save the down payment the opportunity to purchase homes."

You say that like it is a good thing. Listen, the reason RE went into full bubble mode was because of this. Guess what, if 90% of these people couldn't afford the down payment and subprime lenders weren't there to shower them with all of this "free" money, the demand for overpriced RE would dry up in exactly one second and prices would crash - thereby allowing many more people to all of a sudden be able to afford the down payment. It's magic how that works isn't it?

This is similar to how Fannie Mae and Freddie Mac are not a good thing. Most people would say, "Fannie is a great thing because it allows many more people to become home owners than would otherwise be able to". But this approach has exactly the wrong outcome - it causes prices to skyrocket as there is an artificial demand coming in from a new source that shouldn't be there.

Let's take the GSEs away as well as ALL of the subprimes. Heck, might as well do away with the Alt-A's and get super-conservative with the underwriting (min 20% down, FICO 750+ only, etc.) and watch home prices collapse to 1995 levels. This would truly be better for everyone in the long run as FICO 500's with no down aren't really responsible enough for home ownership anyway, are they? Trust me, a lot of these subprime borrowers will wish that they had remained renters in the next several years. Now they are just going to wind up as a debt serf.

darth toll said...

And another thing, if all the subprimes and GSE recipients disappear, house prices crash which we know is a good thing overall, and it's even good for the renters because the landlords can rent to them much more inexpensively as they don't have to cover such a huge mortgage. You've really got to think this all the way through before you jump to conclusions about the supposed benefits of "loans for anyone."

AnalysisGuy said...

The best history about the Bakersfield market as far as price can be found at:

thebubblebuster.com

in response to Darth Toll, ROROYOYO said...

...yes, let's hope and pray that the entire housing industry (the current backbone of our economy like it or not) is crushed and home values plummet....Great Depression II sounds so fantastic!

Orrrr, we could get realistic and let's say, oh, I don't know, reign in the mess that the subprime market has made, help those taking the hits as best we can, and return to steady, value-supported real estate appreciation.

darth toll said...

"help those taking the hits as best we can, and return to steady, value-supported real estate appreciation"

Hope and pray nothing my friend, you are truly living in a fantasy world if you believe even half of what you said. I want to see GD2 about as much as you do (not at all.) However, what you and I want is immaterial. We face a myriad of structural imbalances which would take all day to discuss. I absolutely do not want to see this at all but it is coming nonetheless. Remember that all credit-induced booms end in collapse and we have just witnessed the largest ever by any measure. Currently it takes about $10 of debt growth to equal $1 of GDP. If you understand what I just said then you also understand what is coming.

Value-supported real estate appreciation is a total myth. Historically RE is a terrible investment and over 150 years has basically tracked to wage growth (aka inflation.) RE is a place to live, nothing more. To the extent that the boomers and others have been able to leverage their retirements with RE could be chalked up to lucky timing and/or riding a bubble wave.

Reigning in the mess that subprime made? Yeah right. Subprime made the bubble and it's undoing will destroy it. Don't argue with me, just look at the facts. Look at when subprime really started taking off and where and look at the huge bubble aftermath which coincides precisely.

"help those taking the hits as best we can"

I sure as hell don't want to pay for a massive bailout and why should I? These idiot borrowers (GF's and FB's) got up to their necks in debt they knew they could never repay, and the idiot investors and mortgage companies lent out money they knew could never be repaid. Besides, your wish for a bailout is not going to come true. There isn't enough money to support a $35TR debt bubble short of monitizing all of that debt (collapsing the dollar) and then we'll get GD2 and WW3.

Let's just stick with GD2 shall we?

Bakersfield Bubble said...

"help those taking the hits as best we can"


F-them!

We better not pay for this mess. Let the WS clowns and the FB's sink together!

NO Taxpayer funded bailouts!

floridaclosers said...

Eventially all subprime will merge to ALT-A standards or cease to exist.

CFIC.COM/FLORIDA said...

Eventually all Sub-prime lenders will merge to ALT-A standards or cease to exist. This will obviously be good for the broker world forcing wholesale lenders to compete in the arena of service (turn time) and service alone. This is an area that most sub-prime lenders are lacking in. Say goodbye to all the in-experienced non service orientated brokers that were only here for a quick buck!!!

Anonymous said...

>>>>>>>>>>>>>>>>>>>>>>>>>>
AnalysisGuy said...

The best history about the Bakersfield market as far as price can be found at:thebubblebuster.com
>>>>>>>>>>>>>>>>>>>>>>>>>>

Thanks for the link..lots of good info.

Anonymous said...

FHA is laughing very hard right now. Wall Street made them a relic by agreeing to buy 100% loans but look at them now. I work as a subprime AE and agree there has to be a cleansing.

Anonymous said...

Subprime lending has been around long before anyone posting on this blog. Bottomline, credit is a trust and most people honor that trust if at all possible. Unless unemployment increases, interest rates increase, and real estate deflation continues subprime will still be available as long as credit exists. And if you don't believe it, you haven't lived on this planet very long.

Bakersfield Bubble said...

Anon Wed Feb 21, 06:45:00 PM PST -


It is difficult to get a man to understand something when his job depends on not understanding it.

Upton Sinclair
US novelist & socialist politician (1878 - 1968)

Anonymous said...

Sounds like an opportunity to pick up some RE on the cheap if you have the cash. Does anyone have any REO contacts that they would be willing to pass along? I have some interest.

Anonymous said...

"Unless unemployment increases, interest rates increase, and real estate deflation continues subprime will still be available as long as credit exists. "


Any more caveats? LOL

Perfect Storm said...

Subprime has only been around since 1994. Subprime took over from the Savings Loans going bankrupt. Subprime will be extinct once new federal regulation is introduced.

Subprime can only operate with stated income no doc liar loans, without that they are toast.

Anonymous said...

All this talk about blowing out all the subprime borrowers strikes me as classist. Don't get me wrong, there are lots of people who shouldn't have gotten loans, but the original Fannie Mae conforming standards were ridiculous.
Ask anyone who had bad credit from a couple credit cards when they were in college, but then grew up and got a job. They were screwed as the prices of homes went up out of sight in the period from 2000 to 2006. Without subprime loans those hardworking reformed slackers would have permanently been on the wrong side of the capital equation.
moderation in all things.

Anonymous said...

Let's not forget the Mortgage Brokers and LO's that solicit the "sub-prime" borrowers.Making 1% to 5% on the back end! Need a CPA letter for a 100% Stated S/E Loan. No problem for these Mortgage Brokers and LO's. They can get what ever you need. Heck, I think Mortgage Brokers are the 1st Line of Defense! I say the sub-prime co's should go after the Brokers!

off said...

Never have so many said so little.

The combined IQ's of the posters on this site wouldn't add up to 100.

I always wondered how the anarchists spend their down time between G8 meetings and soccer riots. Now I know. They play Chicken Little on topics they know zero about...

Anonymous said...

Quick question: I have a prime 30-year ARM here in England and pay the Bank of England rate plus 85 basis points. When you talk about subprime loans in the United States, how much above Fed Funds are you generally talking about? 200bps? 400pbs? 600bps? 800pbs? I know they vary, but what would be the typical subprime ARM spread in the States? And what do they range from? (i.e., "200pbs to 1,000bps). I'm talking about after the teaser period comes off. Thanks in advance.

Batman

Anonymous said...

ARM margins on 2/28 in subprime are usally start rate minus 200 - 300 BPS.

So a 8.00% start rate would have a margin of 500-600 BPS.

Anonymous said...

after all is said and done- sub-prime will probably exsist - most broker shops will close down; the sub-prime lenders that can't clean up thier act will go as well - there will be refinancing still - as long as credit is here and people need money and have to pay bills they will refinance

Does anyone really think the sub-prime lending business will go away?

I don't think so - maybe it will take a few blows but recovery will come about...

Anonymous said...

I worked in sub-prime when the last blow up happened and I continued working in sub-prime up until recently (yes my company shut their doors because of losses). Does anyone here remember the early 90’s sub-prime collapse? The same issues that led up to that sub-prime collapse are the same things that are driving this collapse. After the last implosion, underwriting guidelines were retooled to eliminate high risk. The companies started out with a new conservative approach and then over time guidelines were loosened and loose guidelines became the norm. Competition overrode reason and Wall Street’s memory faded. Now 6-7 years later we are here again only this time we have a serious problem due to the volume of sub-prime loans in the market place. Anyone had to be stupid not to see this was coming. All you have to do is look at what the guidelines were---100% loans, stated and full doc with 580 credit scores, were being handed out like candy to babies…95% with 525 scores no problem. 1 day out of bankruptcy--no problem---60 days delinquent on your car--sure we will lend you a 100% to buy a house---don't make enough money to afford the house?--lets do stated income or a pay option ARM….collection accounts—we don’t look at those. I can go on and on but my point is look how ridicules and loose the standards have become. I’ve decided to get out of sub-prime and go to work for a conforming company. I don’t think I will be safe in conforming. This sub-prime collapse is going to affect the overall housing industry for years to come. We can only hope that the effects won’t throw our economy into a recession.

Anonymous said...

It seems to me that most of the "bearish" posters here who are drooling at the thought of subprime ceasing to exist want more people renting and fewer buying. Could it be that they are RE investors with inventory? Self-serving, perhaps? Or as one post puts it, are they just "classist"?

Marc Emrich said...

Pretty amazing to read all the negative comments concerning subprime lenders. I have been a mortgage broker for 14 years and have a firm belief in the subprime product as a means to opening up channels for individuals to purchase real estate. Sure there have been and will always be more foreclosures with a subprime loan but they should be priced to absorb that. The damaging loans that should be abolished are the 1% option arms, ridiculous loans that are very profitable to mortgage brokers due to high yield spreads that are hidden from all but the most sophisticated borrower. But even they have their purpose (I have sold only 4 or 5 of these loans over the past several years to people in cyclical businesses that need to utilize their low pay options on occasion)
I have a theory about what is the main cause of the foreclosures in the subprime market. The most common purchase loan was the 2/28 arm, 80/20 purchase. The problem with the loan was the margins. Why did lenders have to set such high margins? Let me explain. Say I sold a 2/28 loan in 1/2005 at a rate of 7% on the first and 11% fixed on the second. January 2007 rolls around and it is refi time for the first adjustment. Now say the libor index in 1/05 was 3.7% ( I have no idea what it really was) so the margin between the start rate and libor at that hypothetical time was 3.3%. But the note on the deal has the margin at the start rate less one (which is actually a generous margin. Some margins are equal to the start rate.) This is suicide for the lender if the market goes flat or negative. My question is why are the margins on subprime loans set this way? I assume it was to make the loans more marketable in the secondary market but I guarantee you a large percentage of the foreclosures would not be happening today if margins on the subprime arms were set at the start rate less the current index rate. As they have been done in ALT-A loans. In fact Alt A margins are actually very often less than the difference between the start rate and the index. Go figure!

Anonymous said...

Hehe. It's not 'classist' to suggest that people who can't afford to pay fully amortizing loans should not be borrowing money to purchase a house. That's called common sense.

The enablers and speculators (poor and rich, informed and clueless) who have financed this debt-leveraged housing bubble deserve scorn.

We are all going to be affected (for the worse) by their negligent and compulsive excesses. Stability is not a hallmark of the gambling mentality.

Anonymous said...

"They play Chicken Little on topics they know zero about..."

Yes, and that includes you, dingleberry. Thanks for sharing your wisdom, oh high one.

Anonymous said...

off said:

"The combined IQ's of the posters on this site wouldn't add up to 100."

Thanks for adding your 2 IQ points. We are now that much closer to your goal of 100 ;)

Anonymous said...

Whoa, a lot of you folks are just not realistic about the future of the sub-prime lenders. Yes, many have fallen b/c of poor accounting combined with large 2006 repurchases and low secondary market premiums. However, most of you are forgetting a very key point - where there is demand, there will always be companies to meet that demand. What you are seeing is merely the market correcting itself, and the strong will indeed survive. To answer one poster's question re: which sub-primers will make it, I would say: New Century (public), Equifirst (Barclays), Option One (HR Block), Decision One (HSBC), First Franklin (Merril Lynch), Encore (Bear Stearns), and Countrywide (Public, soon BofA??) will all make it, plus a few more. Wilmington is owned by AIG, so they have the all the financial backing in the world, but I can't imagine AIG will let them continue to operate as they are now. Argent is up in the air, the entire group of companies is up for sale, but carries a lot of baggage.

Simply put, whether you like it or not, sub-prime isn't going anywhere, but will undergo significant changes for sure. People that know the macro side of the business a lot better than anyone here are betting on a future w/ SP lenders. Merril Lynch paid over $1B for First Franklin in 2006, knowing the condition of the market all too well. These companies and the people who run them are not stupid.

Anonymous said...

HSBC just sacked their top management. So I guess that puts them in the 'no longer stupid' bin.

Agreed there is a place for subprime in lending - a small niche. The explosion in subprime lending was fueled by easy money, easy credit, easy regulation, and easy appraisals. This circle jerk is coming to an end. Whether the end will be apocolyptic for investors (who seem to be waking up to the idea of risk) remains to be seen.

I agree that the big lenders you named will survive this subprime credit contraction/implosion. That is because they are not primarily subprime lenders. They also have plenty of *quality* loans on their books to keep them afloat. Uh... that would be *my* mortgage (and others like it) keeping them alive, in spite of themselves.

Anonymous said...

The genius posters on here obviously don't have a finance company background or mentality...I won't give enough away (lots of people at my company read this stuff) but let's just say I have over 10 years background in correspondent, subprime acquisitions for a bank. Not to school anyone but you do realize that subprime is not all "crappy borrowers with low credit scores and low income", right? Subprime has shifted a lot since I first started at a finance company years ago...it's not 14% rates to 560 borrowers, frankly the average score has gone above 630 industry wide over the last couple of years. Borrowers who couldn't prove their income, people who had a couple of lates on their credit were allowed an opportunity to purchase homes at decent rates. Those borrowers are not the problem and do not deserve to be lumped in with the borrowers who would normally have to go hard money. The problem is the influx of real estate investors driving values up and thus creating A LOT of fraud. EPD (early payment defaults) are due to fraud almost all of the time and frankly have little to do with being a subprime borrower or not. Do a little more research, there will always be a need for subprime and not every bank and finance company is to blame for the market tanking-the companies who insisted on originating stupid loans (pick a pay, pay option ARMs, etc.) at low rates are at fault. Eventually bad decisions catch up with you...

Anonymous said...

Name calling...and an original one...dingleberry. You are frustrated that disaster isn't upon yet, aren't you?

I know this about bubbles. This is one and one never knows how they end or who the ultimate losers/winners are until someone writes a book about it years later. That being said. My assumption is that if anything the houses that are ultimately auctioned off, in disrepair, will be purchased by the same socioeconomic class of people who lost them. Not the same people, but working class people. It will be neither good nor bad, nor a disaster. The interesting part of this fool's blog is how real estate is perceived as a common market when it is the most local of any market. Block by block real estate has different value. You may very well be in depression in Bakersfield for a decade while next door may be booming. So don't look at the national economy look next door.

Bakersfield Bubble said...

Let me answer a few of the Anon comments:


1)"The genius posters on here obviously don't have a finance company background or mentality"

I am a CPA who has 15 years experience and I have seen the inside of many bank, brokers, pension funds and other financial instutions. All of this experience was outside of Bakersfield, FWIW.



2)"lots of people at my company read this stuff"

When I look at my hits I see IP addresses from all the WS firms, the FED, several major newspapers, Ivy league and other major US universities.

Personally, I could care less who comes here, but there is something that is making them spend hours looking around the bubble blogs.
Maybe they know something is happening in the credit markets that the MSM has yet to fully report, but has been reported on the bubble blogs for a couple of years now?



3)"The interesting part of this fool's blog is how real estate is perceived as a common market when it is the most local of any market"

Personal attacks are used by those who have a weak hand or fear something. Either way, I could care less if you ever came back - In fact, don't!

Perfect Storm said...

To answer one poster's question re: which sub-primers will make it, I would say: New Century (public), Equifirst (Barclays), Option One (HR Block), Decision One (HSBC), First Franklin (Merril Lynch), Encore (Bear Stearns), and Countrywide (Public, soon BofA??) will all make it, plus a few more.

New Century and Decision One are going down for the count, are you smoking the same crack you feed your clients when they sign the liar loan docs you prepare.

Trolls are hitting the blogs lately, another sign of the impending doom that awaits them.

anon #1111 said...

"The interesting part of this fool's blog is how real estate is perceived as a common market when it is the most local of any market"

This is the most ridiculous statement I've read in the replies and shows absolutely no understanding of the RE bubble and the causes thereof. This is a common talking point from the REIC, that all RE is local. It's complete hogwash. Maybe this was somewhat true 20 years ago but it is totally untrue today.

RE has turned into an investment vehicle instead of a place to live. It's totally disconnected from it's fundamentals and hyper-liquidity and all of its attendant issues (mortgage fraud, appraisal fraud, specuvestors, flippers, equity locusts) are everywhere and anywhere. This RE bubble is global actually. Enough with the Realtwhore platitudes.

Anonymous said...

Hey Bakersfield Bubble...you made my point for me. When I said a finance company background, I meant someone having worked FOR a finance co. like Am. Gen., Associates, HH, Beneficial, Transamerica, etc. Those companies made a mint off of subprime borrowers in the worst of times (that's why most of them were bought by biggers banks, etc. and are still operating that way in some form). If you haven't worked in this environment, it makes it very difficult to comment on subprime lending. That was my only point. Banks and Wall Street investors have never understood how to price for risk, that's why they get out as soon as the going gets tough. This is Wall Street's (Merrill, Lehman, Goldman, etc.) fault not the fault of the people who have spent most of their lives in subprime. They built the models and understand the risk (although obviously they miscalculated).

JMO

Anonymous said...

WMC is officially screwed. Last day to doc refi's is today and the word is that they only have enough capital to get loans funded through 2/28. If you want your loan funded with WMC, get it in today.

Apparently they didn't even make payroll this morning...

Anonymous said...

Anonymous, You are a complete MO go back to work! Did you grow up near a chemical plant?

Anonymous said...

Anonymous, Really? Do you build a lot of models? Did you ride a short bus when you went to reform school?

Dr. Busty McSewsalot said...

Come on brainiac, WMC is owned by GE but couldn't make payroll this month? Give me a break, your source (if you even had one) is incorrect. WMC employees got paid today. Why don't you go back to discussing celebrity news, you obviously don't have the intelligence to read this blog much less post a comment on this subject.

Ivana Trousersnake said...

All this talk about WMC about to roll the grenades down their aisles, and schedule ice cream social hour in all the branches really is taking all the attention away from the REAL story.

The new President and CEO of WMC came forward today to claim that he is the biological father of Anna Nicole Smith's baby, Dannielynn Hope Marshall Stern.

pina coladas, monkies and coconuts said...

Well Ivana, I'm sure that $500,000,000 could cover the cost of their repurchases and spare them a couple dollars to move corporate to their huge office in the OC...

Anyone offering 100% to the "helpers" outside of Home Depot still??

Gut Check said...

While all you folks at New Century are lobbing mortar rounds at WMC with your anonoymous comments, your REIT is collapsing, you are restating income - no more hide the weeney- and your execs are being taken to task for reading Martha Stewarts other magazine, 'How to get rich with Insider Trading'.

Spotlight of Truth said...

My my my....
Crazy talk everywhere. Brokers don't know what to believe. What is the real story???

Who will tell the real story?

Synonymous said...

News: Encore is buying Fannie Mae. Anyone else heard this? I just got it confirmed by a source in DC...

pina coladas, monkies and coconuts said...

You want the real story? Son, you can't handle the real story. Face the truth. As long as po' folk need loans, sub-prime will be here one way or another. Tell your tired brokers to rest their heads easy tonight and go market to underqualified people again on Monday. Have a nice weekend.

Anonymous said...

For those AEs out there worried about the subprime market, you should worry about state and federal stings. When business gets bad, loan officers get stupid. Fraud is on the rise in a major way. Don't encourage it. The city and Nassau & Suffolk county have a task force ready to roll brokers. One loan isn't worth it.

Anonymous said...

Bako Bubble - looks like "Who's Next" wasnt' among the options in your original post.

For the uninformed, that would be ResMae, who declared bankruptcy yesterday (Fri, Feb 23). Just a handful of bad subprime borrowers got them into deep deep trouble I'm sure. Yes that was sarcasm for anon ;) Personally I wouldn't lend someone with a FICO under 650 twenty bucks, but that's just me. If you want to lend them half a million, just be prepared for what *might* happen ;)

Never thought I'd see the day where a mortgage originator called a CPA clueless, but I guess that is the new reality in subprime. Seems like there is a plethora of new realities in supbripe - unfortunatley most of them involve the exposure of Ponzi-like finance.

Anonymous said...

As an AE who works for one of the agreed "survivors", I see the damage done by fraudulent loans every day from coast to coast. Many of them have (had) great credit scores... I see borrowers who make $20K a year (and readily admit that) but want to refinance loans from stated income applications created by independent brokers or LO's that show them making $1 or $2 hundred thousand. LO's fill those applications out and brokers sign off on them. It's amazing and sad to "enlighten" the person who truly believed what they were told....that the $600K mortgage they have really ISN'T a 5 year Fixed rate 1% loan. [AND it has a 3 year hard prepayment penalty]. They call up wondering how we can help them when they can't make that 1% minimum payment, and the internal rate on their Pick-A-Payment loan is at 9% + (MTA+4.5)... Two mowers and a weed whacker in the back of the pickup =President of XYZ Landscaping a thriving enterprise with a CPA letter.
Ignorance isn't bliss, stupidity isn't curable. Those who prey on the ignorant and stupid are still buying new BMW's while they can. It scares me to death...

Don't Panic! said...

Don't Panic!

WMC is not going to shut the doors! Not sure who this "Chris" is, but clearly not a person who is in the know! His or her comments are clearly ridiculous and irrational at best.

WMC must right size, as does every other player that will survive this market. Don't be surprised if GE finds the opportunity here and emerges as the market leader in Q3.

I promise you, that whoever "Chris" is, they have no idea what they are talking about!

Phil McCracken, BS said...

WMC Mortgage (dba GE Money Bank - yes, as in General Electric, one of the largest corporations in the world) is ponying up billions to engage a hostile takeover of New Century. You heard it here first.

Seriously, who thinks up this nonsense? WMC shutting its doors; Managers at Argent engaging "machetes" to "literally cut costs"; Encore buying Fannie Mae. Are you all drunk?

Who pays attention to any of this nonsense, anyway? It's a blog! The people who know what's going on aren't sitting on websites making up crap like I just did...

Try reading a newspaper.

Bakersfield Bubble said...

Try reading a newspaper

________________________

I (and other bubble bloggers) have scooped the newspapers on at least 20 of the lenders that went under.

Some were weeks before any newspaper even knew what was going on!

When the news first starting breaking in Dec 06 - NO ONE was talking about, except a few blogs; now its in every newspaper everyday !

Anonymous said...

I'm an AE for a subprime bank and I went to my office but the doors were locked...no one in sight. My blackberry shut off and my laptop blew up in my bag! The world is ending and us AE's dont know what to do! HEEELLLLPPPPP!

get a life guys.

no one cares about your insights and quid quo pros.

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