Tuesday, March 13, 2007

Lend next to go down?

As first reported here by me, on Monday LEND appeared to be having a credit crunch. Now comes the "official" news from the MSM. The stock is down more than 50% this morning in early trading and appears headed for the same fate as the other toxic lenders out there:

Credit Crunch Cracks Accredited :

Accredited Home Lenders is facing a liquidity crisis that analysts say could leave it following in the footsteps of New Century.

Accredited, a San Diego-based mortgage company, said early Tuesday it is exploring various strategic options, including raising additional capital, as much of its cash has been used up by margin calls and forced loan repurchases. Shares plunged 58%, dropping $6.02 to $5.38.

Accredited said it has met $190 million in margin calls this year, most of them in the last month.

The company said it is seeking waivers on its credit lines and cutting costs through moves including layoffs.

"We believe that the downturn in the subprime market, and the likelihood that it will persist, sharply raises the liquidity risk," said Keefe Brutette & Woods analyst Bose George in a research note Tuesday morning.

George, who downgraded Accredited to underperform, said the company "will lose money for the foreseeable future, which will likely trigger a liquidity crisis."


Anonymous said...

I want to see some of these slime ball go to prison.

Anonymous said...

Prison? For what, offering loans borrowers couldn't possibly repay? Who is really to blame here, the fool who offers someone a loan they can't possibly repay or the fool who takes the loan he can't possibly repay? Seems like there is blame enough for both sides.

Bakersfield Bubble said...

Last anon are you serious?

These lenders were in on the game from the beginning. They were all about the commissions.

I remember reading the posts at Brokers Outpost a few years ago and being discusted by what they were saying. They were screwing people over left and right.

WaLender said...

Before you initiate a Witch-Hunt for the Brokers and Sub-Prime lenders of the world lets take a trip down memory lane.

Are you forgetting that 20 years ago you couldn't obtain a mortgage without a 30% down-payment and 720+ credit score? How many people today would own their homes if not for lenders who pushed the limits and expanded the criteria so that American dream could become a reality? Whether you agree or not, that includes the 'below-average' Joe.

And, while I admit there are a number of sleaze-ball lenders out there, there are far greater numbers of legitimate lenders who stand ready to help those whose dream of homeownership, despite a somewhat jaded past, still burns bright.

Let me also remind you there are overwhelming numbers of so-called "A" borrowers out there who are defaulting on their mortgages on a daily basis. No one is damning their lenders for giving them a chance.

I'm a Broker and proud of it. I'll continue to stand up to the mud-slingers because I believe that everyone deserves the chance to own their own home. If they meet the investor’s guidelines then more power to them and congratulations. Maybe you should be turning your words to the investors who are looking to make a buck...and by the way, where is your money invested?

Darth Toll said...

"Prison? For what, offering loans borrowers couldn't possibly repay?"

This is the same sort of shenanigans that bankers used to bankrupt large portions of the African (and South American?) continents. The PTB knew that Africa had large deposits of natural resources but it was deemed too financially and politically expensive to overthrow the governments. Therefore the bankers were brought in to lend more money to these countries than they could ever possibly repay. They would say things like, "don't worry about repaying us, once your oil field (or gold mine or diamond mine) comes online, you'll have more than enough money to pay back the loan." Then, when the countries couldn't pay back the debt, the mines and oil fields were foreclosed on and, presto! mission accomplished - the natural resources were now legally in the hands of US and/or Euro corporate interests. Much cheaper overall and way more effective than a war.

This is similar to how the bankers of today have performed a complete flea flicker on the FBs. They lend them more money than they could ever possibly repay. The FBs predictably go underwater and are foreclosed on, and the banks wind up with tons of RE on the cheap. Now there are many "banks" that aren't going to be around when this deflation finally finishes off the last of the FBs (NEW, LEND, etc). But the Fed has determined who the member banks are and these will hold vast stockpiles of RE, further consolidating and enriching their positions.

So yes, the lenders are to blame and it's all part of a larger scheme. To the extent that there were GFs in the game making money, these were just useful idiots for the bankers, creating lots of free buzz and helping to hype the RE bubble into a full-blown mania. Most of these GFs will get sacrificed along with the FBs.

Now Dodd is on about a subprime bailout, but this will just be more icing and gravy for member banks and won't do consumers any good.

Bakersfield Bubble said...

How many lenders told buyers - "You better buy now or you will be priced out forever", "its a great time to buy or sell", "They are not making anymore land", "sign here for this POA and you can refinance in a few years, when your credit is better", etc...

I have been blogging on this bubble for two years now. Mainly at The Housing Bubble Blog and here since Aug 2006. So this is not some new witch hunt.

Many of us bloggers have been complaining about the "fog a mirror" lending standards that existed in 2003-2006. The massive appraisal fraud, cash back at closing fraud, lending fraud (stated income - McDonalds employee making $15,000 per month, etc..) and other fraudulent activities associated with this mania.

This massive credit bubble was fueled by the FED dropping rates way too low for way too long. The lenders and wall street then saw an opportunity to take advantage of the sheeple by placing them in loans they knew, once they reset, they could never afford.

The blame also goes to the realtors and their campaign to continue to suck buyers into homes. They are spending $40 million this year to advertise "its a great time to buy"

There are plenty of witches to hunt here. I have exposed many of them besides just the lenders. There is plenty of blame to go around. The lenders just happen to be front page news now that the MSM has caught onto the story.

Clearly the sinking ship that is subprime and soon to be Alt-A has you and others worried. You should be if you committed fraud and ripped off any cleints, if you didn't, then you have nothing to worry about.

Darth Toll said...

"How many people today would own their homes if not for lenders who pushed the limits and expanded the criteria so that American dream could become a reality?"

You say this like it's a good thing. Historically, anything above about a 60% home-ownership rate is a warning of a potential bubble. Do you realize that many people are not suited for home-ownership? Do you also realize that the GSE's stated mission of making home-ownership possible for the masses will wind up having the exact reverse effect by causing prices to skyrocket due to artificial demand? When I finally go to buy a house (2010?) I don't want to compete against a bunch of idiots that shouldn't even be there (based on financially sound underwriting) bidding up the price of the RE with their no-money down ARMs.

Also, define the word "own". You don't actually own something until you've paid off the note, and you and I both know this will never happen for most of these people you describe.

Bakersfield Bubble said...

How about this tidbit. These lenders knew it was a JOKE!:

The Desert Sun. “The disclosure by Irvine-based New Century Financial Corp that its bank lenders were pulling funding didn’t come as a shock to some mortgage lenders and bankers in the Coachella Valley.”

“‘The (adjustable-rate mortgage) program was never really designed as a mainstream program,’ said said Jim McPhail, a mortgage finance specialist in Palm Desert. ‘It has come around, and it’s now biting them in the butt.’”

“Home buyers initially may have been able to get more home through such ‘designer’ loan programs, but the long-term impact was pretty easy to predict, said Bill Powers, president of Pacific Western Bank. ‘Whenever you do those types of loans, somebody has to pay the piper some day,’ Powers said.”

“It’s becoming obvious that mortgage lenders will have to be more careful about sizing up loans that people can really qualify for, said Frank Montiforte, loan officer La Quinta. ‘I like that word ‘tightening up’ - it’s the right thing to do,’ Montiforte said.”

Anonymous said...

Walender is a a misbegotten evil slime , at the heart of this impending disaster...

He says, "ory lane.

Are you forgetting that 20 years ago you couldn't obtain a mortgage without a 30% down-payment and 720+ credit score? How many people today would own their homes if not for lenders who pushed the limits"

Look, NONE of these people today who you helped into home-debtorship actually own their home. What they "own" is a bank debt/mortgage they never can (and never could have been able to) pay off.

You who are proud brokers (yah, you sure done broke those poor fools who bought the house but shouldn't have) have simply set up these folks to fail, shoehorning them into debt that is impossible to pay, gambling on impossible "re-fi's" as mortgages with evil clauses begin to ratchet up from teaser rates.

Broker. Yeah. Sure.

arroyogrande said...

“How many people today would own their homes if not for lenders who pushed the limits and expanded the criteria so that American dream could become a reality?”

The American Dream: Renting (interest only loan) from the bank using most of your budget until the bank takes it away from you? No, wait, that’s not it.

Gwynster said...

You could always get a 30 yr loan with as little as 5% down or even 3% down with FHA. If you had crap credit scores then yes, you needed a bigger downpayment.

The fact that people were steered into products not meant for the traditional home owner is why so many are upset.

But I also agree that the person signing the paperwork is to blame as well. There is no such thing as free money (Ben and the helicopters aside).

AnalysisGuy said...

The reason more blame is applied to the brokers and sub-prime lenders is that they were the more knowledgable party. Their greater knowledge leads to greater responsibility.

Simply because they know more (e.g. this guy can never repay this mortgage) doesn't give them the right to take advantage of those who know less.

This however doesn't mean the borrower have no responsibility. Both sides MUST be held accountable!


AnalysisGuy said...

On other note, I went for a walk around the old neighborhood yesterday. I walked by the home I sold in May 2005 and noticed it was now vacant.

My old neighbor's told me that the buyer of my old home moved everything out about 3 or 4 days ago. He suspects the home is being foreclosed. It's scary how fast this guy began sinking. According to my buddy who helped faciliate the transaction the buyer mortgaged 103% of the price. He didn't stand a chance.

Bakersfield Bubble said...

Are you forgetting that 20 years ago you couldn't obtain a mortgage without a 30% down-payment and 720+ credit score?


Reread your post. This is total bullshit! You are a liar!

30% down payment needed to buy a home? You need to check you facts before you come in here making shit up!

Your lies are typical of this industry!

Mozo Maz said...
This comment has been removed by the author.
Mozo Maz said...

My grandmother's boyfriend told me that after WWII you did need 33% down to buy. But that's a looooottt more than 30 years ago. Banks were very risk averse then since they still had recent memories of the Great Depression.

I don't see reasonably larger down payments as the end of the world. My parents did it. My mother was a part time teacher and my father a gounds maintenance man. Not rich folks by any means... we lived in a small apartment with hand me down furniture and a black and white TV.

They saved up 15% and financed a house that they payed off and now own oughtright, after making 28 years of payments. Isn't THAT what the American Dream was supposed to be? Not debtitude forever!?!?

Anonymous said...

OF course Dodd wants the Gov't to bail-out the idiots and scammers: bail-out is the Amerikan Way.

People will flood the market to "invest", but only if there's no actual LOSSES involved. Isn't that the same sentiment that fueled the real estate "boom"? ;)

BTW, does anyone actually believe the U.S. Gov't (OK, Bush and his cronies) DIDN'T see this bust in the making many years ago, with changes to bankruptcy laws a few years ago that made it harder to walk away scot-free? Didn't those BK laws tighten up the debtor position of big business? The rich get richer, as they say...

I mean, it's not like the U.S. Gov't hasn't learned a thing or two about the inevitable outcome of unsustainable asset bubbles (1929, 1980 real estate, the dotcom tech stock crash, etc), and figured out they'd better tighten up a few loopholes in the system.

The traditional 'old skool' rules of credit were suspended for the past 5 years, letting tons of ordinary people who felt they were getting left behind get loans to buy over-priced real estate. It was money for nothing, a loan with a wing and a prayer, so what's the problem with bidding $100k over the asking price? That logic actually worked for the past 5 years, and some people made $$$ of the bubble.

Of course, brokers dishing unsustainable option ARMs slept at night by mumbling to themselves that they were allowing ordinary folks to participate in the American Dream, probably knowing that the dream of "ownership" while living in that mortgaged home would be an expensive one: they'd probably be kicked out of the house in 1-2 years (maybe less) when the higher payments kicked in with a vengeance. But hell, the brokers at least earned their commission (which paid for some awful nice mattresses and pillows to help them sleep at night).

Silly me, saving up for my downpayment (by working at a J.O.B.), building my FICO, etc. Didn't know none of that mattered....

If anyone HASN'T figured this out, the credit bubble of the past 5 years was simply a means to avoid/delay a nationwide recession, fueling the real estate price bubble which WAS the only saving grace in our Nation's economy for all this time. Now that the party is over, the rules of sound lending are being reinstituted.

Now that the real estate market is fresh out of idiots and rubes who don't know how to calculate their return on investment, it hardly matters that there's not 'easy' money from lenders now....

PS I always wondered why they were called "brokers": now we see they're part of what's broken in the system...

Anonymous said...

Prison? For what, offering loans borrowers couldn't possibly repay?

Being a stupid lender who gives $400k to people who have little ability to repay isn't criminal, but mortgage fraud IS.

Apparently you're unaware that many loan applicants were told to list a minimum salary on the app (remember: no documentation required) or told to leave their salary unstated, just so they could add some magic numbers later that would make sure the loan was approved. The mortgage broker didn't really care, since the loan was being passed on to a bank, who in turn passed the risk repackaged as mutual funds.

THAT'S criminal, AKA Mortgage Fraud. And it was/is rampant.

Anonymous said...

This is just another example of the America's victim culture. Of course I didn't read the loan docs. Of course I believed every word the broker told me. Of course I relied on the fact that I'd somehow be bailed out of my own bad decisions. And here comes Congress three years too late - wait, make that right on time. Help save me from myself!!

Anonymous said...

True, there will be fraud among the foreclosures. Fraud increases dramatically at the top of any bubble. But how much of it will be fraud the borrower truly has no knowledge of versus fraud the borrower was complicit in? Of all that fraud, how many borrowers intentionally overstated their income to get into the home or stood by knowingly as their broker did it for them?