Tuesday, August 28, 2007

Crisp (and new partner) default on Stockdale Highway Office

From the Bakersfield Californian:


Once-prominent real estate salesman David Crisp last week received two new default notices on the Stockdale Highway offices he bought in April and was named in a lawsuit demanding repayment of more than $160,000.

The Stockdale offices are the latest addition to a growing list of delinquent properties associated with Crisp.

The properties carry first mortgages worth more than $44.2 million and second loans totaling more than $9.3 million

The lawsuit follows others filed by collection agencies in recent months. Two loans totaling nearly $1.9 million taken against the 8800 Stockdale Highway building acked up default notices last week, records show. Crisp, who turned 28 this month, once touted the space as a showcase for a now-defunct giant towers development with Cal State Bakersfield.

The two default notices on the Stockdale building include a $1.37 million loan from Lone Oak Fund LLC and a $505,000 loan from David and Debra Rosenberg of Gardena, public records show. Crisp co-owns the property with George Hawatmeh, a real estate agent in Woodland Hills.

Be sure to read the letter from Chicago Title asking for their money back.

Monday, August 27, 2007

More troubles for David Crisp

Update (8/28/07):

Click here to view the lawsuit.

From KBAK TV 29:

Missouri-based Chicago Title Company, represented by a Pasadena law firm, is suing David Crisp, his wife Jennifer and Crisp's former real estate company, Crisp & Cole and Associates for more than $160,000.

The lawsuit alleges Crisp took out a line of credit on a Central Bakersfield property for more than $149, 000 from Wells Fargo bank. But, when he sold the house in November of last year, the line of credit was not paid off at closing. The principal, plus interest and other fees add up to $160, 917.91.

In July, Chicago Title paid off Crisp's note in full. Wells Fargo then assigned the note to the title company..

From KGET.com

Chicago Title said it issued the title insurance in 2005 when Crisp bought a home that had been converted to a law office at 1215 L St.

The suit said Crisp took out a $149,000 mortgage on the property. He then gave a 99 percent interest --- for free --- in the building to the real estate company he then headed, Crisp, Cole and Associates.

The suit said Crisp and his company sold the house last year for $260,000, but didn't pay the original $149,000 mortgage. Chicago Title said it ended up paying that bill, plus interest, and now wants it to be paid back. The total is more than $160,000.

A first court date has been set for November.





Sunday, August 26, 2007

Countrywide Exposed. I think the IRS might want to look at the 1099 issue?

Countrywide and some of their shenanigans are exposed here in this piece by the Ny Times:

ON its way to becoming the nation’s largest mortgage lender, the Countrywide Financial Corporation encouraged its sales force to court customers over the telephone with a seductive pitch that seldom varied. “I want to be sure you are getting the best loan possible,” the sales representatives would say.

But providing “the best loan possible” to customers wasn’t always the bank’s main goal, say some former employees. Instead, potential borrowers were often led to high-cost and sometimes unfavorable loans that resulted in richer commissions for Countrywide’s smooth-talking sales force, outsize fees to company affiliates providing services on the loans, and a roaring stock price that made Countrywide executives among the highest paid in America.

The company’s incentive system also encouraged brokers and sales representatives to move borrowers into the subprime category, even if their financial position meant that they belonged higher up the loan spectrum.

Independent brokers who have worked with Countrywide also say the company does not provide records of their compensation to the Internal Revenue Service on a Form 1099, as the law requires. These brokers say that all other home lenders they have worked with submitted 1099s disclosing income earned from their associations.
One broker who worked with Countrywide for seven years said she never got a 1099.

“When I got ready to do my first year’s taxes I had received 1099s from everybody but Countrywide,” she said. “I called my rep and he said, ‘We’re too big. There’s too many. We don’t do it.’ ”

Friday, August 24, 2007

Affordability is still the issue

From the Central Valley Business Times:

Despite foreclosure rates that are among the highest in the nation, parts of the Central Valley have some of the least affordable housing in all 50 states, according to a report Thursday from the California Building Industry Association.

Affordability in most California markets actually declined from the first quarter of the year to the second quarter, the association says.

Virtually every metropolitan area in the Central Valley is among the nation’s 30 least affordable areas, says the report.

Survival mode

Its time to go into survival mode in the local real estate market. I am hearing of realtors, mortgage brokers, etc.. leaving in droves. I am also hearing of other local business which are outside of real estate who are now hurting due to this downturn.

What about all the building on the Stockdale Highway and Coffee Road corridors that has been built to house these real estate related entities? I am glad I am not building in these areas because it is going to get ugly.

From the Bakersfield Californian:

Two of Bakersfield’s biggest residential real estate companies, Touchstone Real Estate Group and Watson Realty ERA, have merged, the firms announced Friday.

The newly formed Watson Touchstone Real Estate will be a Goliath, with about 300 agents and control of 19.2 percent of the listing volume on the Bakersfield Multiple Listing Service, the program used to list and track homes for sale.

“It’s an opportunity to take two market leaders, combine their assets, at a time when the market is really lacking a lot of positive direction,” said Watson Realty ERA’s broker, Ken Carter.

From Ichabod:

Watson Truxtun had a super big meeting today. Watson Truxtun is closing and all agents are moving into Touchstone's big building. New company name is Watson Touchstone. I assume they will be keeping ERA, so it will actually be Watson Touchstone ERA! What a mouthful! All Watson agents are moving in and "not very productive" Touchstone agents are being told to utilize "the home office." Some
Touchstone agents are losing their offices supposedly to make room for Watson
big guns. Some agents are NOT happy with the merge!

Rumor mill

I want to thank the readers who have forwarded me some big news.

  • Rumor is Watson Realty is going to close one or both offices in town and merge with Touchstone Realty.

I will post details when I get some confirmation.

Wednesday, August 22, 2007

Bakersfield prices down 10.20% YOY

Homes prices for July 2007 are out:

  • Bakersfield -10.20%

Lets see inventory is up, credit tightening, foreclosures are up, etc...

(hat tip Lander)

Some comic relief

Thanks China GOOGLE!

Stealth Cut in FED Funds Rate

The FED funds rate is set at 5.25. However, due to the massive black helicopter drop to save the IB's and HF's from their foolish ways, the FED funds rate is actually below this level. In effect, we now have a stealth rate cut. Wall Street - thank you Uncle Ben!

FED Funds Rates:

  • 08/21 - 4.89%
  • 08/20 - 5.03%

FBI “Sorry but the timing’s not right.”

Just in time for the grandstanding is Senator Dean Florez. Hey Dean, how about getting out in front of an issue and not just in front of a camera AFTER something happens?

Also, looks like our local DA is keeping his head in the sand.

From KGET.com:

In Bakersfield’s super-heated real estate market several years ago, public records indicate there was a lot of property flipping going on, among other things. But 17 News has learned there are no cases of mortgage fraud being prosecuted right now. In fact, a spokesman for the District Attorney's Office said he can't remember a single case coming across his desk in the last five years.

“That doesn't mean we're not going to get one,” Katz said. “We've had a couple of reports on one or two items, and we've referred those individuals to federal authorities or the State Department of Real Estate for investigation of those claims.”

One of them is Sen. Dean Florez (D-Shafter).

“I intend to ask Sen. [Mike] Machado (D-Linden), who chairs the Banking Committee, to come to Kern County in late September to hold a true oversight hearing on lending practices here,” Florez said. “We need to hear from the Crisps and Coles, from folks who need to come out in the open and talk about how we got to where we're at.”

For the record, the FBI, after initially agreeing to be interviewed for this report, backed out last minute, saying, “Sorry but the timing’s not right.”

Tuesday, August 21, 2007

How much would you pay for this dump?

Great home with great potential. This home needs some work but is priced Accordingly! This property is sold as is! Come and take a look today!

offered at $145,000.

Monday, August 20, 2007

The swami says?

Predictions anyone?

Treasury market yields crashed today. The market is predicting something in the next week or so. I say one of two things will happen 1) a decline in the DOW of 750 points or 2) a FED rate cut.

Whats in your wallet and other layoff news.

From CBSMArketwatch:

Capital One shares dropped 5% to $63.38. The company said it will immediately stop originating mortgages through its GreenPoint Mortgage business, which offers loans through brokers.

The company also said it will close GreenPoint's California-based headquarters along with 31 locations across 19 states. That will mean the elimination of roughly 1,900 jobs, most of which will go by the end of 2007, Capital One.

LA TImes.com:

Good morning. The Wall Street Journal reports that layoffs have begun at
Countrywide Financial. The Journal doesn't say how many jobs have been trimmed,
and Countrywide has not confirmed the report.

CNBC.com: "The job cuts occurred in the company's Full Spectrum lending unit, according to the Journal, which handles many home mortgages known as "Alt-A" ... As of June 30, Full Spectrum's sales force numbered 6,785, according to a filing with the U.S. Securities and Exchange Commission, accounting for more than a third of Countrywide's roughly 18,100 loan origination staff."

Friday, August 17, 2007

Why does Wall Street always get bailed out?

From Yahoo News:

Wall Street loves to talk about letting financial markets weed out the weak. But when the Street itself gets in trouble, it sticks out its little tin cup, asking for help. And gets it.

The subprime-mortgage-market meltdown is a classic example of the way small fry get devoured, but the whales of Wall Street get rescued. Here's the deal: People with crummy credit who took out mortgages are being allowed to fail in record numbers. The mortgage companies that made those loans are being allowed to fail.

Hello? If you believe in markets - which I do - this rescue is especially galling, because Wall Street enabled this mess in the first place. How so? By happily sucking up hundreds of billions of dollars' worth of suspect mortgages from marginal U.S. borrowers-and begging mortgage makers to create more of them. The Street sliced and diced this financial toxic waste into a variety of esoteric securities, making a nice markup when it sold them and generating a continuing stream of profits when it made markets in them.

3 day repo helicopter drop failed. Lets try 30 days this time

Yes we take subprime loans at the FED!

From the WSJ.com

The discount window is a channel for banks and thrifts to borrow directly from the Fed rather than in the markets. Until a few years ago, the discount rate was set below the fed funds rate and loans were subject to numerous conditions. Banks were reluctant to access the window because it was associated with a stigma usually reserved for distressed banks. A few years ago the Fed overhauled the discount window to try and alleviate that stigma; the rate was then set one percentage point above the funds rate and subject to far fewer conditions. In spite of that, discount window borrowing has remained paltry. Discount lending averaged just $11 million in the week ended Aug. 15. Although that was up from $1 million in the prior week it was puny compared to the billions of dollars the Fed has regularly injected into the financial system through open market operations.

Fed officials hope that reducing the penalty rate associated with the window and lengthening the term of loans to 30 days from one further lifts the stigma and gives it a tool to supplement open market operations for reliquefying markets. Open market operations, under which the Fed buys and sells securities to adjust the supply of bank reserves and keep the federal funds rate on target, primarily operate through a network of primary dealers, some of whom are large banks. Thus, they have only indirect impact as a supply of funds for the thousands of banks that are not active in the money market. The discount window however is available to any bank or thrift, and the terms are easier than for fed funds loans. For example, banks may submit mortgage loans, including subprime loans that aren’t impaired, as collateral, and many probably will.

Thursday, August 16, 2007

Run on the Bank at Countrywide?


Anxious customers jammed the phone lines and website of Countrywide Bank and crowded its branch offices to pull out their savings because of concerns about the financial problems of the mortgage lender that owns the bank.

The rush to withdraw money -- by depositors that included a former Los Angeles Kings star hockey player and an executive of a rival home-loan company -- came a day after fears arose that Countrywide Financial could file for bankruptcy protection because of a worsening credit crunch stemming from the sub-prime mortgage meltdown.

At a branch near Countrywide's corporate headquarters in Calabasas on Thursday, a flood of spooked customers seeking to withdraw their certificates of deposit and money-market accounts overwhelmed the small staff.

The Countrywide employees were forced to resort to taking down names and asking people to wait it out or come back later."I'm at the age where I can't afford to take the risk," a 69-year-old retiree who asked not to be identified said after transferring money out of his money market account. "I'll gladly put it back as soon as I know the storm is over."

After reading news reports of Countrywide's troubles, Elsie Ahrens of Calabasas decided to close two of her CD accounts at Countrywide."It's not worth it," said Ahrens, 42. "I don't think it's going to go under, but you never know."Ahrens, who runs a voice and data business, took her money and opened a new account at Bank of America, which she said felt more secure and offered a comparable interest rate.

In Laguna Niguel, Ashmore, the Impac Mortgage president, remarked on how the credit problems stemming from sub-prime loans had filtered down to a local bank branch."It started out with this global credit crunch we've been reading about," he said as another Countrywide depositor left the bank's office. "

It's now gotten down to affecting people like him and me who are closing our accounts."The other depositor shook his head as he climbed into his car."It's all over," he said, and drove away.

Real estate ingenious

Very funny song on our local market. Thanks to the reader who sent it to me, unfortunately blogger makes it difficult to post.

Fortunately, Bakonative at the Bakersfield Californian posted it.

Wednesday, August 15, 2007

Sharks are circling CFC

Brower Piven Announces the Filing of a Class Action Lawsuit Against Countrywide Financial Corp.

Schatz Nobel Izard P.C. Announces Class Action Lawsuit Against Countrywide Financial Corp. -

Scott+Scott, LLP Files Securities Class Action Lawsuit Against Countrywide Financial Corp. On Behalf of Investors -- CFC

Countrywide Cut by Merrill; Bankruptcy Seen Possible

From Bloomberg:

Aug. 15 (Bloomberg) -- Countrywide Financial Corp., the biggest U.S. mortgage lender, was downgraded to ``sell'' by Merrill Lynch & Co., which raised the possibility of bankruptcy if the company loses access to short-term financing.

``We cannot understate the importance of liquidity,'' Kenneth Bruce, a Merrill analyst in San Francisco, said in a research note today. ``Effective insolvency'' would result should creditors force Countrywide to sell assets at depressed prices or investors lose confidence in its ability to raise cash, he wrote.

``If liquidations occur in a weak market, then it is possible for CFC to go bankrupt,'' said Bruce, who had rated Countrywide a ``buy'' since April 2005, according to data compiled by Bloomberg. Countrywide trades under the ticker CFC.

I really think the only thing they can be offered is prayers

A story on the latest foreclosure numbersfrom today's Bakersfield Californian.

They interview my favorite mortgage broker, Tim Cox. You guys remember him. He is the broker who in the Fall of 2005 claimed that "only a natural or man-made disaster would drive home prices down". I wonder how many times he used that line on his clients right after he offered them some verses from the Bible? Now he claims to be offering up prayers for those who are losing their homes.

Anybody thinking this is going to get better -- that's not true," said Bruce Norris, a Riverside investor who analyzes California's market.

In recent years, borrowers turned to riskier loan options to keep up with exploding
prices, he said.

And many of those loans have yet to reset. Higher interest rates generally kick in after three years, meaning today's foreclosures may foreshadow many more, Norris said.

"I'm not only a Realtor," Atondo said, "I'm a counselor now. These people come crying."

Much of Atondo's business is in Lamont, where he spends four or five evenings each week sitting in the McDonald's on Main Street, fielding requests for help from distraught homeowners.

Lenders and real estate agents took advantage of uneducated consumers, he said.
"There were a lot of Realtors that were encouraging -- especially Latino clients -- to buy houses they couldn't afford," Atondo said. "They've left a mess."

Tim Cox, the owner of Crown Mortgage, says it takes at least three late mortgage payments before you get a notice of default. By then, "a mortgage lender won't help, you can't sell and there's (usually) not enough equity to refinance."

"I really think the only thing they can be offered is prayers, and the hopes this works out for them," Cox said.

Another Crisp renter in a defaulted home

You will have to watch the video to find out who the renter is.

I love how Crabtree blames "the greed of the subprime lenders". That is it? They were greedy, however, there were a lot more players than that!

From Eyewitness News.com:

Crabtree tracks foreclosure filings through First American Real Estate Solutions or The Daily Report which get their information from filings at the Kern County Recorder's Office. Though Crabtree disputes the RealtyTrac report, he admits foreclosures remain high in Kern County.

"It's been alarmingly high as compared to all of the years that we've gone through in the recent past," said Crabtree. The local appraiser says Kern County had 651 foreclosures from January to June 30, 2007.

Tuesday, August 14, 2007

Money Market funds are safe?

I try not to post on what other bloggers post (who do a better job than me), however, every now and then something pops up that is surprising.

Remember, per Bernanke and Paulson this issue is contained to subprime. Nevermind, Alt-A, Prime, Hedge Funds, European Banks, Money market funds, ....

From the Big Picture:

via the always astute Doug Kass, we must point you to this simply unbelievable document . . . from Sentinel Management Group.

That's right, some Money Markets -- safe as cash, totally liquid -- are halting redemptions.

Note: there is a big difference between Money Market Funds, and "enhanced" Money Market Mutual Funds -- namely, whether or not they are FDIC guaranteed to $100k.

Bakersfield #8 in foreclosures (remember we are better than Stockton)

From the Central Valley Business Times:

The Central Valley city of Stockton has the highest foreclosure rate among the nation's 100 largest metropolitan areas during the first six months of the year, according to RealtyTrac Inc., an Irvine-based online foreclosure information company.

With one foreclosure filing for every 27 households, Stockton, reports the highest foreclosure rate among the nation's 100 largest metro areas during the first half of 2007. The metro area, comprised of San Joaquin County, reported a total of 8,169 foreclosure filings on 4,239 properties, more than twice the number of properties reported in the previous six-month period and more than triple the number reported in the first six months of 2006.

Detroit, Mich., and Las Vegas, Nev., are second and third on RealtyTrac’s list.

Two more Central Valley cities are on the “top ten” list: Sacramento at fifth and Bakersfield at eighth.

Monday, August 13, 2007

At least we are not Stockton!

From the NY Times:

From Housing Haven to Foreclosure Leader

Published: August 13, 2007

STOCKTON, Calif., Aug. 11 — The north end of Clarks Fork Circle in Stockton tells you all you need to know about the depth of the mortgage worries here. On a curve in a handsome new residential development, four of five homes are for sale, at least two of which have already been repossessed by a lender.

The real estate market in Stockton has no shortage of inventory, which is part of the problem: competition for buyers is tough.

“Bank Owned!” advertises a flier for one home. “New Low Price!” shouts a sign planted in a different lawn.

Once considered a safe alternative to the overheated Bay Area real estate market, Stockton and its streets are now filled with “For Sale” signs and evidence of foreclosures. While hundreds of thousands of people nationwide are being affected by troubles in the lending market, Stockton has the highest foreclosure rate of any city in the country, according to RealtyTrac, a real estate data firm.

“We made bad decisions,” said Ms. Neri, 30, who commutes to her job as a contractor in Pleasanton, about 50 miles to the west. “We’re worried if we don’t sell by the end of the year, we will lose one of them. We just didn’t see the downturn coming.”

Six California cities rank in the top 10 nationwide for foreclosure rates, according to RealtyTrac, with the top three spots — Stockton, Modesto and Merced — situated in the Central Valley, where longtime agricultural towns have turned into small residential cities.

Saturday, August 11, 2007

Countrywide office on Camino Media closed

From the LA Times.com:

A few weeks ago, Kristi Beason and her colleagues at a Countrywide Financial Corp. branch in Bakersfield had two surprise visitors. The executives from the regional office had bad news: The office on Camino Media would be closed, and nearly all of the 15 workers there would lose their jobs.

"They gave us our final paychecks and told us to clean out our desks," said Beason, who worked for the company for four years, most recently as a loan processor. "They had a cleaning lady there with boxes waiting for us."

Beason, 27, said the layoffs were unexpected, even though she knew the business was turning sour.

With home sales slowing, fewer people needed loans. Lenders had also tightenedstandards, denying mortgages to people with shaky credit in reaction to risingdefaults.

Other mortgage companies had ordered layoffs and some had gone bankrupt. But Countrywide, as the biggest U.S. mortgage lender, didn't seem likely to be laying people off, Beason said.

"Being with a company for that long, it was just a shock," she said. "I wasn't really sure what to do.

"In retrospect, however, the signs of trouble were there. The Bakersfield office closed just 12 loans in the month leading up to the layoffs, compared with about 50 a month when the market was doing well, she said.

MUST SELL!!! $384,000!!!

Before you read todays CL post, be sure and check out the brown lawn specials on CL. Did we run out of water?:

Brown Lawn#1

Brown Lawn #2

Brown Lawn #3

Brown Lawn #4

Desperate seller on craigslist here. Looking up public records on this home
someone is going to take a serious bath on this deal.

This home was purchased November 4, 2005 for $565,000. The previous sale was $255,500 on May 29, 2003. Looks like the original owner made out ok, however, our
current seller is looking to get out without his shirt?

From Craigslist:

$384000 Going into forclosure, MUST SELL!!! $384,000!!!

Drop dead gorgeous home,4 bed, 2 bath, beautiful pool, outstanding kitchen, sadly going into forclosure, selling for at LEAST $35,000 under market value, please call FAST cause it's going FAST!!! House will go to FIRST serious buyer!!! For more pictures go to http://www.kerncountyhomesforsale.com/

11313 Talledega

Friday, August 10, 2007

Local economy growing? Service jobs are great - do you want fries with that?

After today's massive 3 day repo black helicopter drop (which will have to be paid back @5.25%) I will focus on some local news.

Remember when Dr. Grammy predicted prices would rise 2.5% in 2007. What was he smoking? I emailed him on this and he blew me off. This leads me to question anything else he puts out. With all the information out there who in their right mind would think prices would rise this year? However, I will post his latest number anyway, at least we can look back and laugh at how wrong they are

From CSUB and Dr. Grammy:

Kern County's economy took a distinct turn for the better during 2007's second quarter, although the housing market continued to slump, according to the latest issue of the Kern Economic Journal, published by California State University, Bakersfield.
"Kern's economic growth accelerated from 2 percent to 3.6 percent," said Abbas Grammy, professor of applied economics at CSUB, and publisher of the Kern Economic Journal. He also said the county's labor markets improved. "The county's economy created 5,900 jobs in the second quarter, which ended June 30," he said. Both the farm sector and the non-farm sector were bustling; in the non-farm labor market, both government and private sector jobs increased.
And as one might expect in an expanding economy, the jobless rate shrank. Unemployment dropped from 8.5 percent in the first quarter to 8 percent in the second quarter, continuing its stay in single-digit territory. Kern County's jobless rate has stayed in single digits now for two years, the longest stretch in at least 25 years. Grammy attributes much of this to the job-creation efforts of the Kern Economic Development Corp. Bakersfield (5.5 percent), California City (6.2 percent) and Ridgecrest (4.5 percent) had unemployment rates below the county average.
Businesses also improved their outlook, moving up to 120 on the Business Outlook Index, compared to 117 the previous quarter. "This gain in business confidence reversed the declining trend of the index over the previous five quarters," Grammy said.
Consumers, however, weren't quite as confident. The Bakersfield Consumer Sentiment Index dropped to 120, down from 125 the previous quarter. Mark Evans, interim dean of the School of Business and Public Administration and an economics professor at CSUB, characterized consumers' attitude as "ho-hum."
And if you thought the housing market was down, it is. All gauges measuring the housing market continued their downward spiral. The median housing price in both Kern County and Bakersfield was down for the third quarter in a row, housing sales were down, and new building permits were down. Adding to the gloomy housing picture, foreclosures were up, and the housing affordability index was up.

Thursday, August 09, 2007

CFC timebomb?


Countrywide news coming

Here you go:

From the WSJ.com:

Countrywide Financial Corp. faces "unprecedented disruptions" in debt and mortgage-finance markets that could hurt earnings and the company's financial condition, the Calabasas, Calif., lender said in a regulatory filing.

The company, the largest U.S. home mortgage lender in terms of loan volume, said reduced demand from investors is prompting it to retain more of its loans rather ...

Still contained?

I recall hearing Bernake, Paulson, et al going on and on about how this issue was contained. What a load of crap.

From Bloomberg:

Aug. 9 (Bloomberg) -- U.S. stocks tumbled as subprime mortgage contagion
and hedge fund losses halted a three-day rally and sent brokerage shares to
their worst rout since 2002.

``The fear is feeding on itself,'' said Jeffrey Kleintop, who helps oversee more than $173 billion as chief market strategist at LPL Financial Services in Boston. ``It's what you don't know that seems to be taking over the market.''

Citigroup Inc., JPMorgan Chase & Co. and Goldman Sachs Group Inc. led the declines after BNP Paribas SA, France's biggest bank, barred withdrawals from funds that owned subprime loans. The Dow Jones Industrial Average fell 387 points and the S&P 500 slid 3 percent, their worst declines since a Feb. 27 drop spurred by a sell-off in China.

Also, fromBloomberg:

Aug. 9 (Bloomberg) -- The European Central Bank, in an unprecedented response to a sudden demand for cash from banks roiled by the subprime mortgage collapse in the U.S., loaned 94.8 billion euros ($130 billion) to assuage a credit crunch.
The overnight rates banks charge each other to lend in dollars soared to the highest in six years within hours of the biggest French bank halting withdrawals from funds linked to U.S. subprime mortgages. The London interbank offered rate rose to 5.86 percent today from 5.35 percent and in euros jumped to 4.31 percent from 4.11 percent.
The ECB said it would provide unlimited cash as the fastest increase in overnight Libor since June 2004 signaled banks are reducing the supply of money just as investors retreat because of losses from the U.S. real-estate slump. Paris-based BNP Paribas SA halted withdrawals from three investment funds today because the French bank couldn't value its holdings. Stocks in the U.S. and Europe fell, a turnaround from the past three days when investors concluded that credit market risks were abating.
``There seems to be a hole in the balance sheet of World Inc. that will have to be filled by government intervention,'' said Peter Lynch, chairman of private equity fund Prime Active Capital Plc in Dublin. ``The ECB is treating this like an emergency; it might make traders even more afraid.''

Beazer Homes Holding Corp

Something very interesting in the latest Notice of Trustee sales.

Apparently, Beazer Homes Holding Corp owns a parcel of land at 524-170-12-00 that will be sold at an auction on August 29, 2007. The value of the land is approximately $3,000,000.

Is this the same Beazer Homes (BZH) that is listed on the NYSE that has been in the news lately for their issues with a rumored bankruptcy, class action lawsuits and subprime lending troubles in North Carolina?

If anyone can confirm this or has any other information please let me know.

Credit Crunch grows

Don't listen to the talking heads that keep telling you the 10 year treasury is down, so home mortgage rates are going down - Wrong!

Two things make this untrue:

1) The spread on loans has increased dramatically. See my post below on BofA raising jumbo rates by 150 bps. See also several of the links at the left where this has been discussed ad naseum.

2) This is the more important one. Many (if not most) of the ARM's are tied to LIBOR. It looks like LIBOR rates hit the fan this morning and the credit crunch has hit a new level:

Aug. 9 (Bloomberg) — The British Bankers Association said the overnight lending rate that banks charge each other to borrow in dollars rose to 5.86 percent today from 5.35 percent.
The so-called London interbank offered rate in dollars is the highest since the start of 2001. The benchmark borrowing rate is rising on concern banks face growing losses on investments linked to U.S. mortgages. The European Central Bank said today it is “closely monitoring the situation and stands ready to act to assure orderly conditions in the euro money market.'’
“Liquidity in the market has completely dried up as investors aren’t recycling their money back because of subprime concerns,'’ said Saher Bin Jung, a trader on the commercial paper desk at Commerzbank AG. “Levels have shot up dramatically since yesterday as issuers are trying to entice investors back.'’
Bank of America Corp. and UBS AG said their overnight borrowing costs rose 65 basis points to 6.00 percentage points. Royal Bank of Canada said its costs rose to 6.00 percentage points from 5.37 percentage points. Barclays also said it needs to pay 6.00 percentage points to borrow overnight in dollars, up from 5.38 percentage points yesterday.From Bloomberg

Tuesday, August 07, 2007

Our friends to the north are not faring much better

(photo Steve R. Fujimoto/Times-Delta)

The Times Delta. “In Tulare County, foreclosures are on the rise, dramatically, as homeowners who had mortgages with initially low payments are unable to meet the higher payments that kicked in after a few years. Notices of default, precursor to foreclosure, are running almost three times the rate of two years ago.”

“As homes are turned back to lenders and residents move out, many Visalia neighborhoods have been left with empty homes that no one cares about.”

“At 2008 E. La Vida Ave., there is an abandoned home in the South Pointe neighborhood, where most homes are less than 5 years old.”

“Neighbor Dena Brown wouldn’t mind buying the house next door. ‘It has just sat there empty for months,’ Brown said. If Brown doesn’t purchase it, she wishes someone else would because the dry grass is a safety hazard.”

“‘We stayed home on July Fourth because we weren’t sure if something would catch fire,’ Brown said.”

Sunday, August 05, 2007

Underwater home owner strategy

This hilarious comment comes from the comment section at the AZ republic from an article on foreclosures. I wonder how many other people will use this "strategy":

I will be letting my home in Surprise go into foreclosure as soon as my new cheaper nicer home is completed and closed. It is a stratigic move to get me out of a f'ed up sitiuation that my "friends" in the mortgage and realestate business helped me get into. My house appraised for $325k over 2 years ago. I owe the full ammount! Now my same "friends" tell me I can sell my house for $225k! I'm going to shove this house right up the Bank's back door. The property I bought with the equity in my house sold and put $175k in my pocket. I'm paying cash on a new build that I'm stealing in this market. The builder is eating out of my hand and sucking up to me like never before. He is my (inappropriate term) because I have the cash in hand and I can go wherever I want to buy a new house and he knows it. I'm going to pay cash for a new "fringe" home in Pinal county. Screw the banks and their BS interest. Now I can save for retirement at an increased rate then sit back and watch the sparks fly. Our vehicles are paid for and we have credit cards with zero balances on them. So I could give a dam about a credit score any more.

Crisp and Cole accusations grow

Please read this entire article. There are some serious accusations here of fraud, straw buyers and cash back at closing. WOW. This is getting ugly.

From the Bakersfield Californian:

Crisp & Cole defaults: Nightmare on Ordsall Street

Agent: Crisp & Cole took advantage of weak for gain

BY GRETCHEN WENNER, VANESSA GREGORY AND STEVEN MAYER, Californian staff writerse-mail: gwenner@bakersfield.com, vgregory@bakersfield.com, smayer@bakersfield.com

Between October 2005 and the following summer, a low-level office worker at the former Crisp & Cole Real Estate company bought four homes.

Together, the properties cost nearly $1.9 million.

Three are now in default. The fourth sits empty, a for-sale sign posted out front.

The office worker's estranged husband is angry.

He believes his ex never really owned the units.

"At 14 bucks an hour she can't afford any of those homes," said Gabe Stockton, a local real estate agent, of his former partner, Janie "JJ" Stockton. The couple is legally separated, court records show.

Gabe Stockton believes JJ and other employees were pressured to put their names on properties in order to make the company more money through related transactions.

Saturday, August 04, 2007

ACA Capital = Subprimes Ultimate ticking time tomb?

Thanks to the readers at Calculated Risk for the tip on this story from Barrons.com:

Subprime's Ultimate Time Bomb?
By Jonathan R. Laing

DESPITE A GLOSSY ROSTER OF OWNERS LIKE Bear Stearns Merchant Bank and New York investment company Third Avenue Trust, ACA Capital (ACA) has flown under Wall Street's radar for most of its 10-year history.

And perhaps that has been a good thing, given ACA's rather picaresque history. The firm's founder, H. Russell Fraser, often arrived at the New York headquarters in full Marlboro Man western regalia -- until he was sent packing to his ranch in Wyoming in 2001 as a result of lousy numbers in ACA's original business of insuring low-rated municipal-bond issues. Then in 2004, ACA suffered the ...

Here is a summary of this story from a CR reader:

Barron's has a big piece today on ACA Capital ( 27 percent owned by BSC by the way 1 ) Here are the highlights : 1) ACA has a market cap of 260 million but has insured 15.7 billion of mostly subprime securities. Notably , 9.3 billion of this waste is in mezzanine subprime CDOs ; 2) ACA"s total CDO exposure is 61 billion ( subprime and commercial mortgage debt ) on their capital base of 326 million , which equates to leverage of 180 to one : 3) ACA has been criticized by some as being a warehouse ( or perhaps toilet ) for the risky obligations of big boys such as MER , LEH ,BSC and RBS Greenwich Capital ---billions of such obligations have been parked in ACA by these big boys : 4) If ACA collapses, these risky obligations come cascading back onto the books of the big boys and some of ACA's 25 other counterparties; 5) Barron's further notes a high level of risk of the 9.3 in mezzanine risk exposure being pancaked with just a 7 percent collateral impairment spread across the pool underlying the mezzanine CDOs (note the mezz CDOs consist of BBB slices of MBS pools ; 6) S&P has forecast 11-14 cumulative losses for 2006 vintage subprime mortgages ; Half of ACA 9.3 billion in mezz guarantees consists of 2006 paper , while the balance is 2005 and 2007 paper that has not performed much better ; Finally , ACA has 5 billion in "high grade" subprime CDOs of which 2/3 is Single A tranches .. a 10 percent collateral loss wipes out the single A tranches and 2/3 of any high grade CDO they are a part of... ACA thus has a 3 billion exposure on this 5 billion exposure.... capped off with about a half billion more risk from CDO squared products which get snuffed with a 4.5 collateral loss. ... The mess just keeps expanding and the opaque risks are becoming visible. I wonder if BSC , MER and LEH will disclose this by way of a 10Q August 9th , which is when I understand 10 Q'a are due for the second quarter ? Thoughts ? ?

WSJ looks back at some of the previous bullish comments by insiders

Reading today's local newspaper I see that Beazer slashed $100,000 off some of their homes. I would be very upset if I lived in on of these neighborhoods.

Here is a report from this mornings WSJ.com that takes a look at some of the previous, BS, er.. bullish comments made by industry insiders.

From WSJ.com:

Recently, the nation's largest home builder, D.R. Horton Inc., reported the first quarterly loss in its 15-year history as a public company.

Yet, only two years ago, Donald Tomnitz, Horton's chief executive, declared confidently: "We can earn our way through any economic cycle, except one like the Great Depression." The Great Depression hasn't hit -- but Horton's earnings have declined more severely than most anyone imagined.

Another big home builder, Beazer Homes USA Inc., was beset by rumors the past week that it might be filing for bankruptcy-law protection. Beazer firmly denies the rumors. Still, housing analysts are fretting that banks will clamp down on lending to some builders -- squeezing them of cash just when they might need it.

In theory, this should have let builders buy land only when they needed it, while giving them the right to walk away if they didn't need it. The builders would also be helped by the overall scarcity of developable lots in many markets, Citigroup analyst Stephen Kim wrote in a bullish March 2006 research report.

"The linchpin to our bullish thesis has been the emergence of land constraints," Mr. Kim wrote at the time. "This will allow the builders to outperform expectations in any given demand scenario."

Friday, August 03, 2007

Back from vacation. Update!

Here is a great update on the current state of the mortage market. This is getting ugly:

From National Mortage News:

I'll put it bluntly: if you operate a non-depository mortgage firm (lender or servicer) and don't have a deep-pocketed parent or hedge fund as a sugar daddy you're likely to be out of business by year-end, probably sooner. In the 20-plus years that I've been covering residential finance I haven't seen a financial meltdown this swift since the S&L crisis of the mid-to-late 1980s. One subprime executive who closed his shop a few months ago told me, "This is a liquidity crunch the likes I have never seen." Meanwhile, the mudslide is rolling downhill from Wall Street to mortgage bankers, to loan brokers, and then the consumer. Nomura Securities is winding down its mortgage conduit and three major Wall Street firms are preparing to slash their mortgage desks and or conduits…

And consider this: On Friday, Wells Fargo had hiked its jumbo loan rate to 8%. (This is the same Wells Fargo that up until a few months ago was overstating its subprime correspondent purchases so it could garner bragging rights to being No. 1 in subprime.) Meanwhile, Countrywide Financial Corp., considered a bedrock of the industry, is tightening up requirements on warehouse credit doled out to its correspondents.